|
|
|
|
|
Newfoundland and Labrador, Canada
|
4911
|
98-0352146
|
(Province of other jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial Classification
Code Number)
|
(I.R.S. Employer Identification Number)
|
Common Shares, without par value
|
New York Stock Exchange
|
(Title of Class)
|
(Name of exchange on which registered)
|
|
|
|
|
|
•
|
uncertainty regarding the outcome of regulatory proceedings at the Corporation's utilities;
|
•
|
the impact of fluctuations in foreign exchange rates;
|
•
|
risk associated with the impacts of less favourable economic conditions on the Corporation's results of operations;
|
•
|
risk associated with the completion of the Corporation's 2019 capital expenditure program, including completion of major capital projects in the timelines anticipated and at the expected amounts; and
|
•
|
uncertainty in the timing and access to capital markets to arrange sufficient and cost-effective financing to finance, among other things, capital expenditures and the repayment of maturing debt.
|
Exhibit
|
Description
|
99.1
|
|
99.2
|
|
99.3
|
|
99.4
|
|
99.5
|
|
99.6
|
|
99.7
|
|
99.8
|
|
101.INS
|
XBRL Instance
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
FORTIS INC.
|
|
|
|
|
|
/s/ Jocelyn H. Perry
|
|
|
Jocelyn H. Perry
Executive Vice President, Chief Financial Officer
|
|
|
Date: February 14, 2019
|
|
|
ANNUAL INFORMATION FORM
|
1
|
December 31, 2018
|
|
Conversions
1 litre = 0.22 imperial gallons
1 kilometre = 0.62 miles
Conversion using the above factors on rounded numbers appearing in this AIF may produce small differences from reported amounts as a result.
Some information in this AIF is set forth in metric units and some is set forth in imperial units.
|
|
Measurements
GW Gigawatt(s)
GWh Gigawatt hour(s)
km Kilometre(s)
kV Kilovolt(s)
kW Kilowatt(s)
MW Megawatt(s)
MWh Megawatt hour(s)
TJ Terajoule(s)
PJ Petajoule(s)
|
ANNUAL INFORMATION FORM
|
2
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
3
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
4
|
December 31, 2018
|
|
(1)
|
ITC Holdings, a Michigan corporation, owns all of the shares of ITC Great Plains, ITC Interconnection, ITC Midwest, ITCTransmission and METC. ITC Investment Holdings, a Michigan corporation, owns all of the shares of ITC Holdings. FortisUS, a Delaware corporation, owns 80.1% of the voting securities of ITC Investment Holdings. FortisUS Holdings, a Canadian Corporation, owns all of the shares of FortisUS. Fortis owns all of the shares of FortisUS Holdings. 19.9% of the voting securities of ITC Investment Holdings are owned by an affiliate of GIC.
|
(2)
|
UNS Energy owns all of the shares of TEP, UNS Electric and UNS Gas. FortisUS owns all of the shares of UNS Energy.
|
(3)
|
CH Energy Group, Inc., a New York corporation, owns all of the shares of Central Hudson. FortisUS owns all of the shares of CH Energy Group.
|
(4)
|
FHI, a British Columbia corporation, owns all of the shares of FortisBC Energy. Fortis owns all of the shares of FHI.
|
(5)
|
FortisAlberta Holdings, an Alberta corporation, owns all of the shares of FortisAlberta. FortisWest, a Canadian corporation, owns all of the shares of FortisAlberta Holdings. Fortis owns all of the shares of FortisWest.
|
(6)
|
Fortis owns all of the common shares and certain of the First Preference Shares, Series A, B, D and G of Newfoundland Power, which, as at February 14, 2019, represent
95%
of its voting securities. The remaining
5%
of Newfoundland Power's voting securities consist of First Preference Shares, Series A, B, D and G, which are primarily held by the public.
|
ANNUAL INFORMATION FORM
|
5
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
6
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
7
|
December 31, 2018
|
|
|
Customers
|
Peak
Demand
(1)
|
Electric T&D Lines (km)
(2)
|
Gas T&D Lines (km)
|
Generating Capacity (MW)
|
Revenue (millions)
|
GWh Sales
|
Gas Volumes (PJ)
|
Employees
|
||||||||||||
Regulated Utilities
|
|
|
|
|
|||||||||||||||||
ITC
|
—
|
|
23,634
|
|
MW
|
25,400
|
|
—
|
|
—
|
|
$
|
1,504
|
|
—
|
|
—
|
|
692
|
|
|
UNS Energy
|
680,000
|
|
3,107
93
|
|
MW
TJ
|
22,400
|
|
5,000
|
|
3,377
|
|
2,202
|
|
17,406
|
|
13
|
|
2,049
|
|
||
Central Hudson
|
380,000
|
|
1,114
153
|
|
MW
TJ
|
15,100
|
|
2,350
|
|
64
|
|
924
|
|
5,118
|
|
24
|
|
1,014
|
|
||
FortisBC Energy
|
1,030,000
|
|
1,353
|
|
TJ
|
—
|
|
49,500
|
|
—
|
|
1,187
|
|
—
|
|
212
|
|
1,846
|
|
||
FortisAlberta
|
564,000
|
|
2,743
|
|
MW
|
88,900
|
|
—
|
|
—
|
|
579
|
|
17,154
|
|
—
|
|
1,110
|
|
||
FortisBC Electric
|
176,000
|
|
663
|
|
MW
|
7,300
|
|
—
|
|
225
|
|
408
|
|
3,250
|
|
—
|
|
525
|
|
||
Other Electric
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Newfoundland Power
|
268,000
|
|
1,362
|
|
MW
|
12,600
|
|
—
|
|
139
|
|
662
|
|
5,876
|
|
—
|
|
623
|
|
|
|
Maritime Electric
|
81,000
|
|
280
|
|
MW
|
6,100
|
|
—
|
|
145
|
|
203
|
|
1,257
|
|
—
|
|
202
|
|
|
|
FortisOntario
|
66,000
|
|
257
|
|
MW
|
3,500
|
|
—
|
|
5
|
|
201
|
|
1,293
|
|
—
|
|
206
|
|
|
|
Caribbean Utilities
|
30,000
|
|
94
|
|
MW
|
750
|
|
—
|
|
161
|
|
258
|
|
629
|
|
—
|
|
236
|
|
|
|
FortisTCI
|
15,000
|
|
41
|
|
MW
|
650
|
|
—
|
|
91
|
|
88
|
|
237
|
|
—
|
|
173
|
|
|
Non-Regulated
|
|
|
|
|
|||||||||||||||||
Energy Infrastructure
|
—
|
|
—
|
|
|
—
|
|
—
|
|
386
(3)
|
|
184
|
|
853
|
|
—
|
|
65
|
|
||
Corporate and Other
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
59
|
|
||
Total
|
3,290,000
|
|
33,295 1,599
|
|
MW
TJ
|
182,700
|
|
56,850
|
|
4,593
|
|
$
|
8,400
|
|
53,073
|
|
249
|
|
8,800
|
|
(1)
|
Electric (MW) or gas (TJ)
|
(2)
|
Circuit km
|
(3)
|
Includes the Corporation's 51% controlling ownership interest in the 335-MW Waneta Expansion
|
ANNUAL INFORMATION FORM
|
8
|
December 31, 2018
|
|
|
Revenue (%)
|
|
2018
|
2017
|
|
Network revenues
|
66.7
|
67.4
|
Regional cost-sharing revenues
|
28.9
|
28.1
|
Point-to-point
|
1.2
|
1.5
|
Scheduling, control and dispatch
|
1.3
|
1.1
|
Other
|
1.9
|
1.9
|
Total
|
100.0
|
100.0
|
ANNUAL INFORMATION FORM
|
9
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
10
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
11
|
December 31, 2018
|
|
|
Revenue (%)
|
GWh Sales (%)
|
PJ Volumes (%)
|
|||||||||
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
||||||
Residential
|
37.6
|
|
38.1
|
|
26.9
|
|
31.1
|
|
58.8
|
|
56.4
|
|
Commercial
|
22.1
|
|
23.1
|
|
16.2
|
|
19.2
|
|
24.5
|
|
24.7
|
|
Industrial
|
14.4
|
|
14.5
|
|
17.7
|
|
20.3
|
|
2.0
|
|
2.1
|
|
Other
(1)
|
25.9
|
|
24.3
|
|
39.2
|
|
29.4
|
|
14.7
|
|
16.8
|
|
Total
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
(1)
|
Includes electricity sales and gas volumes to other entities for resale and revenue from sources other than from the sale of electricity and gas
|
Generation Source
|
Unit No.
|
Location
|
Date in
Service |
Total Capacity (MW)
|
|
Operating Agent
|
TEP's Share (%)
|
TEP's Share (MW)
|
|
Coal
|
|
|
|
|
|
|
|
||
Springerville Station
(1)
|
1
|
Springerville, AZ
|
1985
|
387
|
|
TEP
|
100.0
|
387
|
|
Springerville Station
|
2
|
Springerville, AZ
|
1990
|
406
|
|
TEP
|
100.0
|
406
|
|
San Juan Station
|
1
|
Farmington, NM
|
1976
|
340
|
|
PNM
|
50.0
|
170
|
|
Navajo Station
(2)
|
1
|
Page, AZ
|
1974
|
750
|
|
SRP
|
7.5
|
56
|
|
Navajo Station
(2)
|
2
|
Page, AZ
|
1975
|
750
|
|
SRP
|
7.5
|
56
|
|
Navajo Station
(2)
|
3
|
Page, AZ
|
1976
|
750
|
|
SRP
|
7.5
|
56
|
|
Four Corners Station
|
4
|
Farmington, NM
|
1969
|
785
|
|
APS
|
7.0
|
55
|
|
Four Corners Station
|
5
|
Farmington, NM
|
1970
|
785
|
|
APS
|
7.0
|
55
|
|
Natural Gas
|
|
|
|
|
|
|
|
||
Gila River Power Station
(3)
|
2
|
Gila Bend, AZ
|
2003
|
550
|
|
SRP
|
100.0
|
550
|
|
Gila River Power Station
|
3
|
Gila Bend, AZ
|
2003
|
550
|
|
SRP
|
75.0
|
413
|
|
Luna Generating Station
|
1
|
Deming, NM
|
2006
|
555
|
|
PNM
|
33.3
|
185
|
|
Sundt Station
(4)
|
1
|
Tucson, AZ
|
1958
|
81
|
|
TEP
|
100.0
|
81
|
|
Sundt Station
(4)
|
2
|
Tucson, AZ
|
1960
|
81
|
|
TEP
|
100.0
|
81
|
|
Sundt Station
|
3
|
Tucson, AZ
|
1962
|
104
|
|
TEP
|
100.0
|
104
|
|
Sundt Station
|
4
|
Tucson, AZ
|
1967
|
156
|
|
TEP
|
100.0
|
156
|
|
Sundt Internal Combustion Turbines
|
|
Tucson, AZ
|
1972-1973
|
50
|
|
TEP
|
100.0
|
50
|
|
DeMoss Petrie
|
|
Tucson, AZ
|
2001
|
75
|
|
TEP
|
100.0
|
75
|
|
North Loop
|
|
Tucson, AZ
|
2001
|
94
|
|
TEP
|
100.0
|
94
|
|
Solar
|
|
|
|
|
|
|
|
||
Utility-Scale Renewables
|
|
Various
|
2002-2017
|
46
|
|
TEP
|
100.0
|
46
|
|
Total Capacity
|
|
|
|
|
|
|
3,076
|
|
(1)
|
Springerville Generating Station Unit 2 is owned by San Carlos Resources Inc., a wholly-owned subsidiary of TEP.
|
(2)
|
TEP, along with the other participants at the Navajao Generation Station plan to discontinue operations of the generating station by the end of 2019.
|
(3)
|
In 2017, TEP entered into a 20-year tolling PPA with SRP to purchase and receive all 550 MW of capacity, power and ancillary services from Gila River Unit 2, which includes a three-year option to purchase the unit.
|
(4)
|
TEP plans to discontinue operations of H. Wilson Sundt Generation Station Units 1 & 2 by the end of 2020.
|
ANNUAL INFORMATION FORM
|
12
|
December 31, 2018
|
|
Generation Source
|
Unit No.
|
Location
|
Date In
Service
|
Resource Type
|
Total Capacity (MW)
|
|
Operating Agent
|
UNSE's Share (%)
|
UNSE's Share (MW)
|
|
|
Black Mountain
|
1
|
Kingman, AZ
|
2011
|
Gas
|
45
|
|
UNSE
|
100.0
|
45
|
|
|
Black Mountain
|
2
|
Kingman, AZ
|
2011
|
Gas
|
45
|
|
UNSE
|
100.0
|
45
|
|
|
Valencia
|
1
|
Nogales, AZ
|
1989
|
Gas/Oil
|
14
|
|
UNSE
|
100.0
|
14
|
|
|
Valencia
|
2
|
Nogales, AZ
|
1989
|
Gas/Oil
|
14
|
|
UNSE
|
100.0
|
14
|
|
|
Valencia
|
3
|
Nogales, AZ
|
1989
|
Gas/Oil
|
14
|
|
UNSE
|
100.0
|
14
|
|
|
Valencia
|
4
|
Nogales, AZ
|
2006
|
Gas/Oil
|
21
|
|
UNSE
|
100.0
|
21
|
|
|
Gila River Power Station
|
3
|
Gila Bend, AZ
|
2003
|
Gas
|
550
|
|
SRP
|
25.0
|
137
|
|
|
Utility-Scale Renewables
|
|
Various
|
2011
-2017
|
Solar
|
11
|
|
UNSE
|
100.0
|
11
|
|
|
Total Capacity
|
|
|
|
|
|
|
|
|
301
|
|
Generation Source
|
Location
|
Date/Projected Date In Service
|
In Service Capacity (MW)
|
|
Developing Capacity (MW)
|
|
Solar
|
|
|
|
|
||
Fort Huachuca Phase I & II
(1)
|
Sierra Vista, AZ
|
2014-2017
|
18
|
|
—
|
|
Springerville
|
Springerville, AZ
|
2004-2014
|
13
|
|
—
|
|
UASTP Phase I & II
(2)
|
Tucson, AZ
|
2010-2011
|
5
|
|
—
|
|
Sundt Areva Solar Thermal
|
Tucson, AZ
|
2014
|
5
|
|
—
|
|
Solon Prairie Fire
(2)
|
Tucson, AZ
|
2012
|
4
|
|
—
|
|
Small PV, Solar (<5MW)
|
Various
|
Various
|
1
|
|
—
|
|
Wind
|
|
|
|
|
||
New Mexico Wind Project
|
Chaves Country, NM
|
2020
|
—
|
|
150
|
|
Total Capacity
|
|
|
46
|
|
150
|
|
(1)
|
TEP has a 30-year easement agreement to facilitate operations on behalf of the U.S. Department of the Army.
|
(2)
|
The University of Arizona Science and Technology Park I & II and Solon Prairie Fire are located on properties held under land easements and leases.
|
Generation Source
|
Location
|
Date/Projected Date In Service
|
Resource Type
|
In Service Capacity (MW)
|
|
Rio Rico
|
Rio Rico, AZ
|
2014
|
Solar
|
6
|
|
Jacobson
|
Kingman, AZ
|
2017
|
Solar
|
4
|
|
La Senita
|
Kingman, AZ
|
2011
|
Solar
|
1
|
|
Total Owned Solar Capacity
|
|
|
|
11
|
|
ANNUAL INFORMATION FORM
|
13
|
December 31, 2018
|
|
Generation Source
|
Location
|
Date/Projected Date In Service
|
In Service Capacity (MW)
|
Under Development Capacity (MW)
|
||
Solar
|
|
|
|
|
||
Red Horse
|
Willcox, AZ
|
2015
|
41
|
|
—
|
|
Avalon I
|
Sahuarita, AZ
|
2014
|
28
|
|
—
|
|
Avra Valley
|
Marana, AZ
|
2012
|
25
|
|
—
|
|
Picture Rocks
|
Marana, AZ
|
2012
|
20
|
|
—
|
|
Avalon II
|
Sahuarita, AZ
|
2016
|
17
|
|
—
|
|
Valencia
|
Tucson, AZ
|
2013
|
10
|
|
—
|
|
E.On Tech Park
|
Tucson, AZ
|
2012
|
5
|
|
—
|
|
Gato Montes
|
Tucson, AZ
|
2012
|
5
|
|
—
|
|
Small PPAs, Solar (<5MW)
|
Various
|
Various
|
8
|
|
—
|
|
Wilmot Solar
|
Tucson, AZ
|
2021
|
—
|
|
100
|
|
Wind
|
|
|
|
|
||
Macho Springs
|
Deming, NM
|
2011
|
50
|
|
—
|
|
Red Horse Wind
|
Willcox, AZ
|
2015
|
30
|
|
—
|
|
Borderlands Wind
|
Catron County, NM
|
2020
|
—
|
|
99
|
|
Biogas
|
|
|
|
|
||
Sundt - Los Reales
(1)
|
Tucson, AZ
|
1998
|
4
|
|
—
|
|
Total Capacity
|
|
|
243
|
|
199
|
|
(1)
|
Purchase of landfill gas for use at Sundt
|
Generation Source
|
Location
|
Date/Projected Date In Service
|
Resource Type
|
In Service Capacity (MW)
|
|
GrayHawk Solar
|
Kingman, AZ
|
2018
|
Solar
|
46
|
|
Red Horse Wind
|
Willcox, AZ
|
2016
|
Wind
|
30
|
|
Kingman Wind Farm
|
Kingman, AZ
|
2011
|
Wind
|
10
|
|
Black Mountain Solar
|
Kingman, AZ
|
2012
|
Solar
|
9
|
|
Total PPA Renewable Capacity
|
|
|
|
95
|
|
ANNUAL INFORMATION FORM
|
14
|
December 31, 2018
|
|
Station
|
Natural Gas Transportation Counterparty
|
Contract Expiration Date(s)
|
||
Gila
|
Transwestern Pipeline Co./El Paso Natural Gas Company, LLC
|
2019-2040
|
||
Luna
|
El Paso Natural Gas Company, LLC
|
2022
|
||
Sundt
|
El Paso Natural Gas Company, LLC
|
2023-2040
|
||
DeMoss Petrie
|
Southwest Gas Corporation
|
Retail Tariff
|
||
North Loop
|
Southwest Gas Corporation
|
Retail Tariff
|
|
Revenue (%)
|
GWh Sales (%)
|
PJ Volumes (%)
|
|||||||||
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
||||||
Residential
|
65.4
|
|
61.5
|
|
42.4
|
|
40.5
|
|
26.9
|
|
25.1
|
|
Commercial
|
29.2
|
|
27.6
|
|
38.5
|
|
39.0
|
|
35.6
|
|
34.5
|
|
Industrial
|
3.8
|
|
3.8
|
|
17.9
|
|
19.0
|
|
21.6
|
|
20.5
|
|
Other
|
0.2
|
|
5.6
|
|
0.5
|
|
0.6
|
|
7.2
|
|
7.6
|
|
Sales for Resale
|
1.4
|
|
1.5
|
|
0.7
|
|
0.9
|
|
8.7
|
|
12.3
|
|
Total
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
ANNUAL INFORMATION FORM
|
15
|
December 31, 2018
|
|
|
Revenue (%)
|
PJ Volumes (%)
|
||||||
|
2018
|
2017
|
2018
|
2017
|
||||
Residential
|
57.7
|
|
58.7
|
|
36.3
|
|
37.1
|
|
Commercial
|
27.7
|
|
28.8
|
|
23.1
|
|
23.5
|
|
Industrial
|
3.2
|
|
2.1
|
|
2.8
|
|
1.8
|
|
Transportation
|
11.4
|
|
10.4
|
|
37.8
|
|
37.6
|
|
Total
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
ANNUAL INFORMATION FORM
|
16
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
17
|
December 31, 2018
|
|
|
Revenue (%)
|
GWh Deliveries (%)
(1)
|
||
|
2018
|
2017
|
2018
|
2017
|
Residential
|
30.9
|
30.7
|
18.5
|
18.1
|
Large commercial, industrial and oil field
|
21.2
|
20.8
|
59.0
|
59.6
|
Farms
|
12.3
|
13.0
|
8.6
|
8.5
|
Small commercial
|
12.2
|
12.2
|
8.4
|
8.1
|
Small oil field
|
8.4
|
8.7
|
5.2
|
5.3
|
Other
(2)
|
15.0
|
14.6
|
0.3
|
0.4
|
Total
|
100.0
|
100.0
|
100.0
|
100.0
|
(1)
|
GWh percentages exclude FortisAlberta's GWh deliveries to "transmission-connected" customers. These deliveries were 7,024 GWh in 2018 and 6,691 GWh in 2017, based on an interim settlement that is expected to be finalized in May 2019, and consisted primarily of energy deliveries to large-scale industrial customers directly connected to the transmission grid.
|
(2)
|
Includes revenue from sources other than the delivery of energy, including revenues resulting from street-lighting services, rate riders, deferrals and adjustments
|
ANNUAL INFORMATION FORM
|
18
|
December 31, 2018
|
|
|
Revenue (%)
|
GWh Sales (%)
|
||
|
2018
|
2017
|
2018
|
2017
|
Residential
|
51.1
|
51.0
|
40.8
|
41.5
|
Commercial
|
27.1
|
26.8
|
30.1
|
29.4
|
Wholesale
|
13.3
|
13.7
|
17.6
|
17.9
|
Industrial
|
8.5
|
8.5
|
11.5
|
11.2
|
Total
|
100.0
|
100.0
|
100.0
|
100.0
|
Plant
|
Capacity
(MW)
|
|
|
Owners
|
Canal Plant
|
580
|
|
|
BC Hydro
|
Waneta Dam
|
493
|
|
|
BC Hydro
|
Waneta Expansion
|
335
|
|
|
Waneta Partnership
|
Kootenay River System
|
225
|
|
|
FortisBC Electric
|
Brilliant Dam
|
149
|
|
|
Brilliant Power Corporation
|
Brilliant Expansion
|
120
|
|
|
Brilliant Expansion Power Corporation
|
Total
|
1,902
|
|
|
|
ANNUAL INFORMATION FORM
|
19
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
20
|
December 31, 2018
|
|
|
Customers
|
|
Peak Demand (MW)
|
T&D Lines (km)
(1)
|
|
Generating Capacity (MW)
|
|
Resource Type(s)
|
|
Newfoundland Power
|
268,000
|
|
1,362
|
|
12,600
|
|
139
|
|
Hydroelectric, Gas, Diesel
|
Maritime Electric
|
81,000
|
|
280
|
|
6,100
|
|
145
|
|
Thermal, Diesel
|
FortisOntario
(2)
|
66,000
|
|
257
|
|
3,500
|
|
5
|
|
Natural Gas Cogeneration
|
Caribbean Utilities
(3)
|
30,000
|
|
94
|
|
750
|
|
161
|
|
Diesel
|
FortisTCI
|
15,000
|
|
41
|
|
650
|
|
91
|
|
Diesel
|
Total
|
460,000
|
|
2,034
|
|
23,600
|
|
541
|
|
|
(1)
|
Circuit km
|
(2)
|
FortisOntario also owns a 10% interest in certain regional electric distribution companies serving approximately 40,000 customers.
|
(3)
|
Includes 24 km of high-voltage submarine cable
|
|
Revenue (%)
|
GWh Sales (%)
|
||
2018
|
2017
|
2018
|
2017
|
|
Residential
|
54.3
|
54.4
|
55.6
|
55.8
|
Commercial and Industrial
|
43.5
|
42.6
|
44.3
|
43.9
|
Other
(1)
|
2.2
|
3.0
|
0.1
|
0.3
|
Total
|
100.0
|
100.0
|
100.0
|
100.0
|
ANNUAL INFORMATION FORM
|
21
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
22
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
23
|
December 31, 2018
|
|
|
Employees
|
Participation in a Collective Agreement
|
|
Union(s)
|
|
Collective Agreement(s) Expiry Date(s)
|
|||
Regulated Utilities
|
|||||||||
ITC
|
692
|
|
None
|
|
|
—
|
|
—
|
|
UNS Energy
|
2,049
|
|
51
|
%
|
|
International Brotherhood of Electrical Workers
|
|
June 2019
– July 2022
|
|
Central Hudson
|
1,014
|
|
59
|
%
|
|
International Brotherhood of Electrical Workers
|
|
March 2021
– April 2022
|
|
FortisBC Energy
(1)
|
1,846
|
|
66
|
%
|
|
International Brotherhood of Electrical Workers, Canadian Office and Professional Employees Union
|
|
March 2019
– June 2023
|
|
FortisAlberta
|
1,110
|
|
79
|
%
|
|
United Utility Workers' Association of Canada
|
|
December 2020
|
|
FortisBC Electric
|
525
|
|
70
|
%
|
|
International Brotherhood of Electrical Workers, Canadian Office and Professional Employees Union
|
|
December 2019
– March 2022
|
|
Other Electric
(2)
|
1,440
|
|
40
|
%
|
|
International Brotherhood of Electrical Workers, Canadian Union of Public Employees, Power Workers' Union
|
|
September 2017
(3)
– December 2019
|
|
Non-Regulated
|
|||||||||
Energy Infrastructure
(4)
|
65
|
|
None
|
|
|
—
|
|
—
|
|
Corporate and Other
(5)
|
59
|
|
None
|
|
|
—
|
|
—
|
|
Total
|
8,800
|
|
53
|
%
|
|
|
|
|
(1)
|
Includes employees at FHI.
|
(2)
|
Includes employees at Newfoundland Power, Maritime Electric, FortisOntario, Caribbean Utilities and FortisTCI. Excludes Belize Electricity.
|
(3)
|
The two collective agreements between Newfoundland Power and IBEW Local 1620 covering 337 Newfoundland Power employees expired on September 30, 2017. Collective agreement negotiations began in the fourth quarter of 2017. Conciliation proceedings occurred in the second quarter of 2018 and no tentative agreements have been reached to date. An application filed by Newfoundland Power to establish essential employees in the event of a labour dispute is under review by the PUB.
|
(4)
|
Includes employees at Aitken Creek (staffed by FortisBC Midstream Inc.), BECOL and FortisBC Alternative Energy Services Inc. The Waneta Expansion is staffed by employees of FortisBC Electric.
|
(5)
|
Employees at Fortis Inc.
|
ANNUAL INFORMATION FORM
|
24
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
25
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
26
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
27
|
December 31, 2018
|
|
|
2018
|
|
2017
|
|
2016
|
|
Common Shares
|
1.75
|
|
1.65
|
|
1.55
|
|
First Preference Shares, Series E
(1)
|
—
|
|
—
|
|
0.6126
|
|
First Preference Shares, Series F
(2)
|
1.2250
|
|
1.2250
|
|
1.2250
|
|
First Preference Shares, Series G
(3)
|
1.0345
|
|
0.9708
|
|
0.9708
|
|
First Preference Shares, Series H
(4)
|
0.6250
|
|
0.6250
|
|
0.6250
|
|
First Preference Shares, Series I
(5)
|
0.7116
|
|
0.5262
|
|
0.4874
|
|
First Preference Shares, Series J
(2)
|
1.1875
|
|
1.1875
|
|
1.1875
|
|
First Preference Shares, Series K
(6)
|
1.0000
|
|
1.0000
|
|
1.0000
|
|
First Preference Shares, Series M
(7)
|
1.0250
|
|
1.0250
|
|
1.0250
|
|
(1)
|
In September 2016 the Corporation redeemed all of the issued and outstanding First Preference Shares, Series E.
|
(2)
|
The dividend rate on the First Preference Shares, Series F and First Preference Shares, Series J are fixed and do not reset.
|
(3)
|
The annual fixed dividend per share for the First Preference Shares, Series G was reset from $0.9708 to $1.0983 for the five-year period from September 1, 2018 up to but excluding September 1, 2023.
|
(4)
|
The annual fixed dividend per share for the First Preference Shares, Series H was reset from $1.0625 to $0.6250 for the five-year period from and including June 1, 2015 to but excluding June 1, 2020.
|
(5)
|
The First Preference Shares, Series I are entitled to receive floating rate cumulative dividends, which rate will reset every quarter based on the then current three‑month Government of Canada Treasury Bill rate plus 1.45%.
|
(6)
|
The Fixed Rate Reset First Preference Shares, Series K were issued in July 2013 at $25.00 per share and are entitled to receive cumulative dividends in the amount of $1.0000 per share per annum for the first six years.
|
(7)
|
The Fixed Rate Reset First Preference Shares, Series M were issued in September 2014 at $25.00 per share and are entitled to receive cumulative dividends in the amount of $1.0250 per share per annum for the first five years.
|
ANNUAL INFORMATION FORM
|
28
|
December 31, 2018
|
|
Company/Security
|
DBRS
|
S&P
|
Moody's
|
|||
Fortis
-
Senior Unsecured Debt
(1)
|
BBB (high), Stable
|
|
BBB+, Negative
|
|
Baa3, Stable
|
|
Caribbean Utilities
-
Senior Unsecured Debt
(1)
|
A (low), Stable
|
|
A-, Negative
|
|
—
|
|
Central Hudson
-
Senior Unsecured Debt
(2) (3)
|
—
|
|
A-, Stable
|
|
A2, Negative
|
|
FortisBC Energy
|
|
|
|
|||
Senior Unsecured Debt
|
A, Stable
|
|
—
|
|
A3, Stable
|
|
Commercial Paper
|
R-1 (low), Stable
|
|
—
|
|
—
|
|
FortisAlberta - Senior Unsecured Debt
(1)
|
A (low), Stable
|
|
A-, Negative
|
|
Baa1, Stable
|
|
FortisBC Electric
|
|
|
|
|||
Senior Secured Debt
|
A (low), Stable
|
|
—
|
|
—
|
|
Senior Unsecured Debt
|
A (low), Stable
|
|
—
|
|
Baa1, Stable
|
|
ITC Holdings
(1)
|
|
|
|
|||
Senior Unsecured Debt
|
—
|
|
A-, Negative
|
|
Baa2, Stable
|
|
Commercial Paper
|
—
|
|
A-2, Negative
|
|
Prime-2, Stable
|
|
ITC Great Plains -
First Mortgage Bonds
(1)
|
—
|
|
A, Negative
|
|
A1, Stable
|
|
ITC Midwest
- First Mortgage Bonds
(1)
|
—
|
|
A, Negative
|
|
A1, Stable
|
|
ITCTransmission -
First Mortgage Bonds
(1)
|
—
|
|
A, Negative
|
|
A1, Stable
|
|
Maritime Electric
- Senior Secured Debt
|
—
|
|
A, Stable
|
|
—
|
|
METC
- Senior Secured Debt
(1)
|
—
|
|
A, Negative
|
|
A1, Stable
|
|
Newfoundland Power
- First Mortgage Bonds
|
A, Stable
|
|
—
|
|
A2, Stable
|
|
TEP
(1)
|
|
|
|
|||
Senior Unsecured Debt
|
—
|
|
A-, Negative
|
|
A3, Stable
|
|
Senior Unsecured Bank Credit Facility
|
|
|
|
|||
UNS Electric
|
|
|
|
|||
Senior Unsecured Debt
|
—
|
|
—
|
|
A3, Stable
|
|
Senior Unsecured Bank Credit Facility
|
—
|
|
—
|
|
A3, Stable
|
|
UNS Gas
- Senior Unsecured Debt
|
—
|
|
—
|
|
A3, Stable
|
|
UNS Energy
- Senior Unsecured Bank Credit Facility
|
—
|
|
—
|
|
Baa1, Stable
|
|
(1)
|
In March 2018 S&P affirmed the Corporation's credit ratings and revised its outlook from stable to negative due to modest temporary weakening of financial measures as a result of U.S. tax reform, which reduces cash flow at the Corporation's U.S. regulated utilities. As a result of the Corporation's revised outlook, S&P also revised its outlook on Caribbean Utilities, FortisAlberta, ITC Holdings, ITC Great Plains, ITC Midwest, ITCTransmission, METC and TEP.
|
(2)
|
In July 2018 Moody's revised its outlook on Central Hudson from stable to negative due to the impacts of U.S. Tax Reform and higher capital expenditures.
|
(3)
|
Central Hudson's senior unsecured debt is also rated by Fitch at 'A-'.
|
ANNUAL INFORMATION FORM
|
29
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
30
|
December 31, 2018
|
|
Name, Residence, Principal Occupation Within Five Preceding Years
|
Director Since
|
Committees
(1)
|
||
AC
|
GN
|
HR
|
||
DOUGLAS J. HAUGHEY
(Chair),
Alberta, Canada
Corporate Director
|
2009
|
l
|
l
|
l
|
TRACEY C. BALL,
British Columbia, Canada
Corporate Director. Executive Vice President and Chief Financial Officer of Canadian Western Bank Group from 2006 to 2014.
|
2014
|
C
|
l
|
|
PIERRE J. BLOUIN,
Quebec, Canada
Corporate Director. Chief Executive Officer of Manitoba Telecom Services, Inc. from 2005 to 2014.
|
2015
|
|
l
|
l
|
PAUL J. BONAVIA,
Texas,
USA
Corporate Director. Executive Board Chair of UNS Energy from May 2014 to August 2014 and Chairman, President and Chief Executive Officer from 2009 to May 2014.
|
2018
|
|
l
|
l
|
LAWRENCE T. BORGARD,
Florida, USA
Corporate Director. President and Chief Operating Officer of Integrys Energy Group from 2007 to 2015.
|
2017
|
l
|
|
l
|
MAURA J. CLARK,
New York, USA
Corporate Director. President of Direct Energy Business at Direct Energy, a subsidiary of Centrica plc, from 2007 to 2014.
|
2015
|
l
|
l
|
|
MARGARITA K. DILLEY,
District of Columbia, USA
Corporate Director
|
2016
|
l
|
|
l
|
JULIE A. DOBSON
, Maryland, USA
Corporate Director
|
2018
|
l
|
l
|
|
IDA J. GOODREAU,
British Columbia, Canada
Corporate Director
|
2009
|
|
C
|
l
|
BARRY V. PERRY,
Newfoundland and Labrador, Canada
President and Chief Executive Officer of the Corporation. President of the Corporation from June 2014 to December 2014 and Vice President, Finance and Chief Financial Officer from 2004 to 2014.
|
2015
|
(2)
|
||
JOSEPH L. WELCH,
Florida, USA
Corporate Director. President and Chief Executive Officer of ITC Holdings from 2003 to 2016.
|
2017
|
(3)
|
||
JO MARK ZUREL,
Newfoundland and Labrador, Canada
President of Stonebridge Capital Inc., a private investment company since 2006.
|
2016
|
l
|
|
C
|
(1)
|
Audit Committee, Governance and Nominating Committee and Human Resources Committee. "C" represents Chair.
|
(2)
|
Mr. Perry is not a member of any committees because he is the President and Chief Executive Officer of the Corporation.
|
(3)
|
Mr. Welch is not a member of any committees as he is not independent because he was President and Chief Executive Officer of ITC Holdings until October 2016. He will be considered independent in November 2019.
|
ANNUAL INFORMATION FORM
|
31
|
December 31, 2018
|
|
Name, Residence, Principal Occupation During the Five Preceding Years
|
Office
|
BARRY V. PERRY,
Newfoundland and Labrador, Canada
President and Chief Executive Officer since January 2015. President from June 2014 to January 2015. Vice President, Finance and Chief Financial Officer from 2004 to June 2014.
|
President and Chief Executive Officer
|
JOCELYN H. PERRY,
Newfoundland and Labrador, Canada
Executive Vice President, Chief Financial Officer since June 2018. President and Chief Executive Officer of Newfoundland Power from 2017 to May 2018, Chief Financial Officer and Chief Operating Officer from 2016 to 2017 and Vice President, Finance & Chief Financial Officer from 2007 to 2016.
|
Executive Vice President, Chief Financial Officer
|
PHONSE J. DELANEY,
Alberta, Canada
Executive Vice President, Chief Information Officer since June 2017. President and Chief Executive Officer of FortisAlberta from 2014 to June 2017.
|
Executive Vice President, Chief Information Officer
|
NORA M. DUKE,
Newfoundland and Labrador, Canada
Executive Vice President, Sustainability and Chief Human Resource Officer since December 2017 and Executive Vice President, Corporate Services and Chief Human Resource Officer from August 2015 to December 2017. President and Chief Executive Officer of Fortis Properties from 2008 to August 2015.
|
Executive Vice President, Sustainability and Chief Human Resource Officer
|
DAVID G. HUTCHENS
, Arizona, USA
Executive Vice President, Western Utility Operations since January 2018 and President and Chief Executive Officer of UNS Energy since May 2014. President and Chief Operating Officer of UNS Energy from 2013 to May 2014.
|
Executive Vice President, Western Utility Operations
|
JAMES P. LAURITO,
Florida, USA
Executive Vice President, Business Development since April 2016. President and Chief Executive Officer of Central Hudson from 2010 to April 2016.
|
Executive Vice President, Business Development
|
JAMES R. REID,
Ontario, Canada
Executive Vice President, Chief Legal Officer and Corporate Secretary since March 2018. Partner with Davies Ward Phillips & Vineberg LLP from 2003 to March 2018.
|
Executive Vice President, Chief Legal Officer and Corporate Secretary
|
GARY J. SMITH,
Newfoundland and Labrador, Canada
Executive Vice President, Eastern Canadian and Caribbean Operations since June 2017. President and Chief Executive Officer of Newfoundland Power from 2014 to June 2017 and Vice President, Customer Operations and Engineering from 2008 to 2014.
|
Executive Vice President, Eastern Canadian and Caribbean Operations
|
STEPHANIE A. AMAIMO,
Michigan, USA
Vice President, Investor Relations since October 2017. Director, Investor Relations from 2016 to October 2017. Director, Investor Relations at ITC Holdings from 2015 to 2016 and Manager, Financial Planning and Analysis from 2013 to 2015.
|
Vice President, Investor Relations
|
KAREN J. GOSSE,
Newfoundland and Labrador, Canada
Vice President, Treasury and Planning since April 2018. Vice President, Planning and Forecasting from 2015 to April 2018. Vice President, Finance, and Chief Financial Officer of Fortis Properties from 2013 until 2015.
|
Vice President, Treasury and Planning
|
KAREN M. MCCARTHY
, Newfoundland and Labrador, Canada
Vice President, Communications and Corporate Affairs since May 2018. Director, Communications and Corporate Affairs from 2016 to May 2018. Director, Customer and Corporate Relations of Newfoundland Power from 2014 to 2016 and Manager, Corporate Affairs and Communications from 2013 to 2014.
|
Vice President, Communications and Corporate Affairs
|
REGAN P. O'DEA,
Newfoundland and Labrador, Canada
Vice President, General Counsel since May 2017 and Associate General Counsel from 2014 to May 2017.
|
Vice President, General Counsel
|
JAMIE D. ROBERTS,
Newfoundland and Labrador, Canada
Vice President, Controller since March 2013.
|
Vice President, Controller
|
ANNUAL INFORMATION FORM
|
32
|
December 31, 2018
|
|
Committee Member
|
Relevant Education and Experience
|
TRACEY C. BALL
(Chair)
|
Ms. Ball retired in September 2014 as Executive Vice President and Chief Financial Officer of Canadian Western Bank Group. Ms. Ball has served on several private and public sector boards, including the Province of Alberta Audit Committee and the Financial Executives Institute of Canada. She graduated from Simon Fraser University with a Bachelor of Arts (Commerce). She is a member of the Chartered Professional Accountants of Alberta and the Chartered Professional Accountants of British Columbia. Ms. Ball was elected as a Fellow of the Chartered Professional Accountants of Alberta in 2007. She holds an ICD.D designation from the Institute of Corporate Directors.
|
LAWRENCE T. BORGARD
|
Mr. Borgard retired from Integrys Energy Group in 2015 where he was President and Chief Operating Officer and the Chief Executive Officer of each of Integrys
'
six regulated electric and natural gas utilities. Mr. Borgard graduated from Michigan State University with a Bachelor of Science (Electrical Engineering) and the University of Wisconsin-Oshkosh with an MBA. He also attended the Advanced Management Program at Harvard University Business School.
|
MAURA J. CLARK
|
Ms. Clark retired from Direct Energy, a subsidiary of Centrica plc, in March 2014 where she was President of Direct Energy Business, a leading energy retailer in Canada and the United States. Previously Ms. Clark was Executive Vice President of North American Strategy and Mergers and Acquisitions for Direct Energy. Ms. Clark's prior experience includes investment banking and serving as Chief Financial Officer of an independent oil refining and marketing company. Ms. Clark graduated from Queen's University with a Bachelor of Arts in Economics. She is a member of the Association of Chartered Professional Accountants of Ontario.
|
MARGARITA K. DILLEY
|
Ms. Dilley retired from ASTROLINK International LLC in 2004, an international wireless broadband telecommunications company, where she was Vice President and Chief Financial Officer. Ms. Dilley's prior experience includes serving as Director, Strategy & Corporate Development as well as Treasurer for Intelsat. Ms. Dilley graduated from Cornell University with a Bachelor of Arts, from Columbia University with a Master of Arts and from Wharton Graduate School, University of Pennsylvania with an MBA.
|
JULIE A. DOBSON
|
Ms. Dobson is Non-Executive Chairman of Telebright, Inc. a private firm established in 1989, where she oversees the development of management software applications and mobile applications for the business to business and business to consumer markets. She was Chief Operating Officer at Telecorp PCS, Inc. and held various senior management positions with Bell Atlantic Corporation during her 18-year career with the company. Ms. Dobson graduated from the College of William and Mary with a Bachelor of Science and from the University of Pittsburgh with an MBA.
|
DOUGLAS J. HAUGHEY
|
Mr. Haughey, from August 2012 through May 2013, was Chief Executive Officer of The Churchill Corporation. Prior to that, he served as President and Chief Executive Officer of Provident Energy Ltd. and held several executive roles with Spectra Energy and predecessor companies. He graduated from the University of Regina with a Bachelor of Business Administration and from the University of Calgary with an MBA. Mr. Haughey holds an ICD.D designation from the Institute of Corporate Directors.
|
JO MARK ZUREL
|
Mr. Zurel is president of Stonebridge Capital Inc., a private investment company, and a corporate director. From 1998 to 2006, Mr. Zurel was Senior Vice-President and Chief Financial Officer of CHC Helicopter Corporation. Mr. Zurel graduated from Dalhousie University with a Bachelor of Commerce and is a Fellow of the Association of Chartered Professional Accountants of Newfoundland and Labrador. He holds an ICD.D designation from the Institute of Corporate Directors.
|
ANNUAL INFORMATION FORM
|
33
|
December 31, 2018
|
|
|
|
Deloitte LLP
(1)
|
Ernst & Young LLP
(2)
|
||||||||||
(thousands)
|
Description of Fee Category
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||
Audit Fees
|
Represents the aggregate fees for core audit services.
|
$
|
9,121
|
|
$
|
7,207
|
|
$
|
—
|
|
$
|
978
|
|
Audit-Related Fees
|
Represents the aggregate fees for assurance and related services that are reasonably related to the audit or review of the Corporation's financial statements and are not included under Audit Fees.
|
1,462
|
|
1,241
|
|
—
|
|
718
|
|
||||
Tax Fees
|
Represents the aggregate fees for services related to tax compliance, planning and advice.
|
636
|
|
497
|
|
—
|
|
7
|
|
||||
Other
|
Represents the aggregate fees for services which are not Audit Services, Audit-Related Fees or Tax Fees.
|
27
|
|
177
|
|
—
|
|
—
|
|
||||
Total
|
|
$
|
11,246
|
|
$
|
9,122
|
|
$
|
—
|
|
$
|
1,703
|
|
(1)
|
The Corporation's external auditors effective as of May 4, 2017.
|
(2)
|
The Corporation's external auditors up to May 3, 2017.
|
ANNUAL INFORMATION FORM
|
34
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
35
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
36
|
December 31, 2018
|
|
|
Authorized
|
|
Issued and Outstanding
|
|
Initial Yield (%)
|
|
Annual Dividend ($)
(1)
|
|
Reset Dividend Yield (%)
|
|
Earliest Redemption and/or Conversion Option Date
(2)
|
Redemption Value ($)
|
|
Right to Convert on a One for One Basis
|
|
Perpetual Fixed Rate
|
|||||||||||||||
Series F
|
5,000,000
|
|
5,000,000
|
|
4.90
|
|
1.2250
|
|
—
|
|
December 1, 2011
|
25.00
|
|
—
|
|
Series J
(3)
|
8,000,000
|
|
8,000,000
|
|
4.75
|
|
1.1875
|
|
—
|
|
December 1, 2017
|
25.75
|
|
—
|
|
Fixed Rate Reset
(4) (5)
|
|||||||||||||||
Series G
(6)
|
9,200,000
|
|
9,200,000
|
|
5.25
|
|
1.0983
|
|
2.13
|
|
September 1, 2013
|
25.00
|
|
—
|
|
Series H
|
10,000,000
|
|
7,024,846
|
|
4.25
|
|
0.6250
|
|
1.45
|
|
June 1, 2015
|
25.00
|
|
Series I
|
|
Series K
|
12,000,000
|
|
10,000,000
|
|
4.00
|
|
1.0000
|
|
2.05
|
|
March 1, 2019
|
25.00
|
|
Series L
|
|
Series M
|
24,000,000
|
|
24,000,000
|
|
4.10
|
|
1.0250
|
|
2.48
|
|
December 1, 2019
|
25.00
|
|
Series N
|
|
Floating Rate Reset
(5) (7)
|
|||||||||||||||
Series I
(3)
|
10,000,000
|
|
2,975,154
|
|
2.10
|
|
—
|
|
1.45
|
|
June 1, 2015
|
25.50
|
|
Series H
|
|
Series L
|
12,000,000
|
|
—
|
|
—
|
|
—
|
|
2.05
|
|
March 1, 2024
|
—
|
|
Series K
|
|
Series N
|
24,000,000
|
|
—
|
|
—
|
|
—
|
|
2.48
|
|
December 1, 2024
|
—
|
|
Series M
|
|
(1)
|
Holders are entitled to receive a fixed or floating cumulative quarterly cash dividend as and when declared by the Board, payable in equal installments on the first day of each quarter.
|
(2)
|
On or after the specified redemption dates, the Corporation has the option to redeem for cash the outstanding first preference shares, in whole or in part, at the specified per share redemption value plus all accrued and unpaid dividends up to but excluding the dates fixed for redemption, and in the case of the first preference shares that reset, on every fifth anniversary date thereafter.
|
(3)
|
First Preference Shares, Series J were redeemable at $26.00 until December 1, 2018, decreasing by $0.25 each year until December 1, 2021 and redeemable at $25.00 per share thereafter. First Preference Shares, Series I are redeemable at $25.50 per share, up to but excluding June 1, 2020, and at $25.00 per share on June 1, 2020, and on every fifth anniversary date of June 1, 2020, thereafter.
|
(4)
|
On the redemption and/or conversion option date and each five-year anniversary thereafter, the reset annual dividend per share will be determined by multiplying $25.00 per share by the annual fixed dividend rate, which is the sum of the five-year Government of Canada bond yield on the applicable reset date plus the applicable reset dividend yield.
|
(5)
|
On each conversion option date, the holders have the option, subject to certain conditions, to convert any or all of their shares into an equal number of cumulative redeemable first preference shares of a specified series.
|
(6)
|
The annual dividend per share for the First Preference Shares, Series G was reset from $0.9708 to $1.0983 for the five-year period from September 1, 2018 up to but excluding September 1, 2023.
|
(7)
|
The floating quarterly dividend rate will be reset every quarter based on the then current three month Government of Canada Treasury Bill rate plus the applicable reset dividend yield.
|
ANNUAL INFORMATION FORM
|
37
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
38
|
December 31, 2018
|
|
2018 Trading Prices and Volumes – Common Shares
|
||||||||||||
|
TSX
|
NYSE
|
||||||||||
Month
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
High (US$)
|
|
Low (US$)
|
|
Volume
|
|
January
|
46.00
|
|
42.56
|
|
23,833,658
|
|
36.76
|
|
34.49
|
|
6,373,078
|
|
February
|
43.48
|
|
39.38
|
|
27,141,195
|
|
35.35
|
|
31.41
|
|
8,235,162
|
|
March
|
43.83
|
|
41.52
|
|
26,194,320
|
|
34.03
|
|
32.26
|
|
6,702,318
|
|
April
|
43.83
|
|
41.76
|
|
15,120,177
|
|
34.19
|
|
32.83
|
|
4,541,728
|
|
May
|
43.60
|
|
41.31
|
|
17,886,103
|
|
33.79
|
|
31.84
|
|
3,684,268
|
|
June
|
42.41
|
|
40.21
|
|
18,718,490
|
|
32.02
|
|
30.88
|
|
7,246,839
|
|
July
|
43.18
|
|
41.71
|
|
15,867,578
|
|
33.02
|
|
31.55
|
|
6,192,773
|
|
August
|
43.65
|
|
42.05
|
|
17,701,954
|
|
33.42
|
|
32.11
|
|
4,534,468
|
|
September
|
43.14
|
|
41.67
|
|
17,025,568
|
|
33.00
|
|
32.09
|
|
4,581,920
|
|
October
|
44.04
|
|
40.71
|
|
33,041,713
|
|
33.84
|
|
31.37
|
|
8,895,053
|
|
November
|
47.06
|
|
42.60
|
|
28,786,806
|
|
35.82
|
|
32.48
|
|
6,370,720
|
|
December
|
47.36
|
|
43.49
|
|
27,966,319
|
|
35.86
|
|
31.80
|
|
8,971,281
|
|
ANNUAL INFORMATION FORM
|
39
|
December 31, 2018
|
|
|
First Preference Shares, Series H
|
First Preference Shares, Series I
|
||||||||||
Month
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
January
|
19.27
|
|
17.95
|
|
448,894
|
|
19.41
|
|
17.10
|
|
149,365
|
|
February
|
18.95
|
|
18.39
|
|
58,465
|
|
19.00
|
|
18.22
|
|
60,571
|
|
March
|
18.55
|
|
17.72
|
|
117,162
|
|
18.69
|
|
17.69
|
|
11,052
|
|
April
|
18.04
|
|
17.46
|
|
48,388
|
|
17.90
|
|
17.53
|
|
13,728
|
|
May
|
18.96
|
|
17.83
|
|
47,539
|
|
18.84
|
|
17.85
|
|
52,500
|
|
June
|
18.81
|
|
18.29
|
|
138,802
|
|
18.65
|
|
18.07
|
|
106,500
|
|
July
|
18.80
|
|
18.20
|
|
57,802
|
|
18.85
|
|
18.21
|
|
22,735
|
|
August
|
18.76
|
|
18.30
|
|
153,861
|
|
19.05
|
|
18.50
|
|
16,689
|
|
September
|
18.58
|
|
18.21
|
|
26,453
|
|
18.90
|
|
18.42
|
|
15,800
|
|
October
|
18.51
|
|
17.09
|
|
292,217
|
|
19.33
|
|
17.42
|
|
67,159
|
|
November
|
17.94
|
|
15.61
|
|
68,366
|
|
18.33
|
|
16.26
|
|
19,705
|
|
December
|
16.18
|
|
14.22
|
|
145,708
|
|
16.65
|
|
13.64
|
|
37,628
|
|
|
First Preference Shares, Series J
|
First Preference Shares, Series K
|
||||||||||
Month
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
January
|
23.48
|
|
22.77
|
|
88,753
|
|
22.98
|
|
21.61
|
|
157,367
|
|
February
|
23.20
|
|
22.10
|
|
73,891
|
|
23.00
|
|
22.35
|
|
60,197
|
|
March
|
22.66
|
|
22.23
|
|
64,898
|
|
22.60
|
|
21.52
|
|
232,405
|
|
April
|
22.80
|
|
22.12
|
|
71,416
|
|
21.72
|
|
21.28
|
|
75,323
|
|
May
|
22.60
|
|
21.89
|
|
126,261
|
|
22.70
|
|
21.58
|
|
108,200
|
|
June
|
22.28
|
|
21.90
|
|
153,957
|
|
21.99
|
|
21.50
|
|
52,196
|
|
July
|
22.45
|
|
22.10
|
|
80,266
|
|
21.88
|
|
21.37
|
|
65,424
|
|
August
|
22.45
|
|
21.92
|
|
182,692
|
|
22.06
|
|
21.58
|
|
346,042
|
|
September
|
22.08
|
|
21.87
|
|
108,890
|
|
21.87
|
|
21.47
|
|
112,970
|
|
October
|
22.03
|
|
20.77
|
|
153,462
|
|
21.94
|
|
20.05
|
|
237,944
|
|
November
|
21.71
|
|
20.45
|
|
93,375
|
|
21.11
|
|
18.05
|
|
163,491
|
|
December
|
21.88
|
|
20.26
|
|
138,827
|
|
18.41
|
|
16.17
|
|
180,451
|
|
|
First Preference Shares, Series M
|
|
||||||||||
Month
|
High ($)
|
|
Low ($)
|
|
Volume
|
|
|
|
|
|||
January
|
24.41
|
|
23.65
|
|
921,049
|
|
|
|
|
|||
February
|
24.45
|
|
23.67
|
|
218,630
|
|
|
|
|
|||
March
|
23.96
|
|
23.28
|
|
158,451
|
|
|
|
|
|||
April
|
23.66
|
|
23.26
|
|
175,864
|
|
|
|
|
|||
May
|
24.07
|
|
23.35
|
|
1,231,722
|
|
|
|
|
|||
June
|
25.00
|
|
23.40
|
|
412,482
|
|
|
|
|
|||
July
|
23.98
|
|
23.24
|
|
195,966
|
|
|
|
|
|||
August
|
24.22
|
|
23.71
|
|
75,810
|
|
|
|
|
|||
September
|
24.20
|
|
23.64
|
|
178,167
|
|
|
|
|
|||
October
|
24.07
|
|
22.15
|
|
203,354
|
|
|
|
|
|||
November
|
23.23
|
|
19.56
|
|
208,333
|
|
|
|
|
|||
December
|
19.97
|
|
17.45
|
|
505,883
|
|
|
|
|
ANNUAL INFORMATION FORM
|
40
|
December 31, 2018
|
|
1.0
|
PURPOSE AND AUTHORITY
|
(a)
|
the integrity of the Corporation's financial statements, financial disclosures and internal controls over financial reporting;
|
(b)
|
the Corporation's compliance with related legal and regulatory requirements;
|
(c)
|
the qualifications, independence and performance of the Independent Auditor and Internal Auditor;
|
(d)
|
the related policies of the Corporation set out herein; and
|
(e)
|
other matters set out herein or otherwise delegated to the Committee by the Board.
|
2.0
|
DEFINITIONS
|
(c)
|
"Committee"
means the audit committee appointed by the Board pursuant to this Mandate;
|
(d)
|
"Core Audit Services"
means services necessary to: (i) audit the Corporation's annual consolidated or non-consolidated financial statements; (ii) review the Corporation's interim condensed consolidated financial statements; and (iii) audit internal controls over financial reporting in accordance with the requirements of the Sarbanes Oxley Act of 2002;
|
ANNUAL INFORMATION FORM
|
41
|
December 31, 2018
|
|
(h)
|
"ERM Program"
means the Corporation's Enterprise Risk Management Program that incorporates an effective risk management framework and applies a logical and systematic methodology to identify, evaluate, treat, monitor and communicate key corporate risks;
|
(i)
|
"Financial Expert"
means an "audit committee financial expert" as defined in Item 407(d)(5) of SEC Regulation S‑K;
|
(j)
|
"Financially Literate"
means having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breath and complexity of the issues that can reasonably be expected to be present in the Corporation's financial statements;
|
(k)
|
"Governance and Nominating Committee"
means the governance and nominating committee of the Board;
|
(l)
|
"Independent"
means, in the context of a Member and in accordance with applicable law and stock exchange requirements, free from any direct or indirect material relationship with the Corporation and its subsidiaries which, in the view of the Board, could reasonably be expected to interfere with the exercise of a Member's independent judgment;
|
(m)
|
"Independent Auditor"
means the firm of chartered professional accountants, registered with the CPAB and the PCAOB, and appointed by the Shareholders to act as external auditor;
|
(n)
|
"Internal Auditor"
means the person(s) employed or engaged by the Corporation to perform the internal audit function of the Corporation;
|
(q)
|
"MD&A"
means the Corporation's management discussion and analysis prepared in accordance with the requirements of National Instrument 51-102F1 and the SEC in respect of the Corporation's annual consolidated and interim condensed consolidated financial statements;
|
(t)
|
"PCAOB"
means the Public Company Accounting Oversight Board or its successor;
|
(u)
|
"Related Party Transactions"
means those transactions required to be
disclosed under Items 404(a) and 404(b) of SEC Regulation S-K and required to be evaluated by an appropriate group within the Corporation pursuant to Section 314.00 of the NYSE Listed Company Manual which, without limiting the foregoing, are transactions between: (i) executive officers, directors, principal shareholders or their immediate family members; and (ii) the Corporation;
|
ANNUAL INFORMATION FORM
|
42
|
December 31, 2018
|
|
4.0
|
COMMITTEE MEETINGS
|
ANNUAL INFORMATION FORM
|
43
|
December 31, 2018
|
|
5.0
|
SPECIFIC RESPONSIBILITIES AND DUTIES OF THE COMMITTEE
|
(a)
|
review and discuss with Management and separately with the Independent Auditor the results of the Corporation's annual Independent Auditor assessment process; and
|
(b)
|
at least annually, obtain and review a report from the Independent Auditor describing the firm's internal quality control process and procedures, including any material issues raised by the most recent internal quality-control review or peer review, or by any inquiry or investigation by governmental or professional authorities (including without limitation the PCAOB and the CPAB) within the preceding five years with respect to independent audits carried out by the Independent Auditor, and any steps taken to deal with such issues.
|
ANNUAL INFORMATION FORM
|
44
|
December 31, 2018
|
|
B.
|
Financial Reporting
|
(a)
|
reports regarding: (i) critical accounting estimates, policies and practices; (ii) goodwill impairment testing; (iii) derivatives and hedges; and (iv) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Corporation's financial statements;
|
(b)
|
analyses by Management and the Independent Auditor regarding significant financial reporting issues and judgements made in connection with the preparation of the Corporation's consolidated financial statements including: (i) alternative treatments of financial information within generally accepted accounting principles related to material matters that have been discussed with Management, their ramifications and the treatment preferred by the Independent Auditor; (ii) major issues regarding accounting principles and presentations, including significant changes in the selection or application of accounting principles; and (iii) major issues regarding the adequacy of the Corporation's internal controls and any specific audit steps adopted in light of material weaknesses or significant deficiencies in internal controls; and
|
(c)
|
other material written communication between Management and the Independent Auditor.
|
(a)
|
the Corporation's annual audited consolidated and non-consolidated financial statements and interim unaudited condensed consolidated financial statements and the Independent Auditor's related attestation reports as well as any related MD&As;
|
(b)
|
Management's report and the Independent Auditor's audit report on internal controls over financial reporting;
|
(c)
|
significant reports or summaries thereof pertaining to the Corporation's processes for compliance with the requirements of the Sarbanes Oxley Act of 2002 with respect to internal controls over financial reporting;
|
(d)
|
the Independent Auditor's quarterly review reports and annual audit results report summarizing the scope, status, results and recommendations of the quarterly reviews of the Corporation's interim condensed consolidated financial statements and of the audit of the Corporation's annual consolidated financial statements and related audit of internal controls over financial reporting, and also containing at least: (i) the
|
ANNUAL INFORMATION FORM
|
45
|
December 31, 2018
|
|
(e)
|
the
Report to Shareholders
contained in the Corporation's annual report; and
|
(f)
|
any other document that the Committee determines should be reviewed and discussed with Management and the Independent Auditor or for which a legal or regulatory requirement in that regard exists.
|
(b)
|
the Annual Information Form and Management Information Circular to be filed by the Corporation;
|
(c)
|
any prospectus or other offering documents and documents related thereto for the issuance of securities by the Corporation; and
|
(d)
|
other financial information and disclosure documents to be released publicly.
|
ANNUAL INFORMATION FORM
|
46
|
December 31, 2018
|
|
E.
|
Policies and Mandate
|
(a)
|
Policy on Reporting Allegations of Suspected Improper Conduct and Wrongdoing (including overseeing procedures for the receipt, retention, and treatment of complaints regarding accounting, internal controls, or auditing matters as well as procedures for confidential, anonymous submissions by employees regarding questionable accounting or auditing matters as required by applicable law);
|
(b)
|
Derivative Instruments and Hedging Policy;
|
(c)
|
Pre-Approval Policy for Independent Auditor Services;
|
(d)
|
Hiring from Independent Auditing Firms Policy;
|
(e)
|
Policy on the Role of the Internal Audit Function;
|
ANNUAL INFORMATION FORM
|
47
|
December 31, 2018
|
|
(f)
|
Disclosure Policy; and
|
(g)
|
other policies that may be established from time-to-time regarding accounting, financial reporting, disclosure controls and procedures, internal controls over financial reporting, oversight of the external audit of the Corporation's financial statements, and oversight of the internal audit function.
|
ANNUAL INFORMATION FORM
|
48
|
December 31, 2018
|
|
ANNUAL INFORMATION FORM
|
49
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Management's Report on Internal Control over Financial Reporting
|
|
|
NOTE 12
|
Property, Plant and Equipment
|
||
Report of Independent Registered Public Accounting Firm - Opinion on the
Consolidated Financial Statements
|
|
NOTE 13
|
Intangible Assets
|
|||
Report of Independent Registered Public Accounting Firm - Opinion on Internal
Control over Financial Reporting
|
|
NOTE 14
|
Goodwill
|
|||
Consolidated Balance Sheets
|
|
NOTE 15
|
Accounts Payable and Other Current Liabilities
|
|||
Consolidated Statements of Earnings
|
|
NOTE 16
|
Long-Term Debt
|
|||
Consolidated Statements of Comprehensive
Income
|
|
|
NOTE 17
|
Capital Lease and Finance Obligations
|
||
Consolidated Statements of Cash Flows
|
|
NOTE 18
|
Other Liabilities
|
|||
Consolidated Statements of Changes in Equity
|
|
NOTE 19
|
Earnings per Common Share
|
|||
Notes to Consolidated Financial Statements
|
|
NOTE 20
|
Preference Shares
|
|||
NOTE 1
|
Description of Business
|
|
NOTE 21
|
Accumulated Other Comprehensive Income
|
||
NOTE 2
|
Regulation
|
|
NOTE 22
|
Stock-Based Compensation Plans
|
||
NOTE 3
|
Summary of Significant Accounting Policies
|
|
NOTE 23
|
Other Income, Net
|
||
NOTE 4
|
Future Accounting Pronouncements
|
|
NOTE 24
|
Income Taxes
|
||
NOTE 5
|
Segmented Information
|
|
NOTE 25
|
Employee Future Benefits
|
||
NOTE 6
|
Revenue
|
|
NOTE 26
|
Terminated Acquisition
|
||
NOTE 7
|
Accounts Receivable and Other Current Assets
|
|
NOTE 27
|
Supplementary Cash Flow Information
|
||
NOTE 8
|
Inventories
|
|
NOTE 28
|
Fair Value of Financial Instruments and Risk Management
|
||
NOTE 9
|
Regulatory Assets and Liabilities
|
|
NOTE 29
|
Variable Interest Entity
|
||
NOTE 10
|
Assets Held for Sale
|
|
NOTE 30
|
Commitments and Contingencies
|
||
NOTE 11
|
Other Assets
|
|
NOTE 31
|
Comparative Figures
|
|
|
|
|
|
|
|
i
|
|
|
|
|
|
ii
|
|
|
|
|
|
iii
|
|
FORTIS INC.
|
|||||||
Consolidated Balance Sheets
|
|||||||
As at December 31
|
|||||||
(in millions of Canadian dollars)
|
|||||||
|
2018
|
|
|
2017
|
|
||
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
332
|
|
|
$
|
327
|
|
Accounts receivable and other current assets (Note 7)
|
1,357
|
|
|
1,131
|
|
||
Prepaid expenses
|
84
|
|
|
79
|
|
||
Inventories (Note 8)
|
398
|
|
|
367
|
|
||
Regulatory assets (Note 9)
|
324
|
|
|
303
|
|
||
Assets held for sale (Note 10)
|
766
|
|
|
—
|
|
||
Total current assets
|
3,261
|
|
|
2,207
|
|
||
Other assets (Note 11)
|
552
|
|
|
480
|
|
||
Regulatory assets (Note 9)
|
2,854
|
|
|
2,742
|
|
||
Property, plant and equipment, net (Note 12)
|
32,654
|
|
|
29,668
|
|
||
Intangible assets, net (Note 13)
|
1,200
|
|
|
1,081
|
|
||
Goodwill (Note 14)
|
12,530
|
|
|
11,644
|
|
||
Total assets
|
$
|
53,051
|
|
|
$
|
47,822
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Short-term borrowings (Note 16)
|
$
|
60
|
|
|
$
|
209
|
|
Accounts payable and other current liabilities (Note 15)
|
2,289
|
|
|
2,053
|
|
||
Regulatory liabilities (Note 9)
|
656
|
|
|
490
|
|
||
Current installments of long-term debt (Note 16)
|
926
|
|
|
705
|
|
||
Current installments of capital lease and finance obligations (Note 17)
|
252
|
|
|
47
|
|
||
Liabilities associated with assets held for sale (Note 10)
|
69
|
|
|
—
|
|
||
Total current liabilities
|
4,252
|
|
|
3,504
|
|
||
Other liabilities (Note 18)
|
1,138
|
|
|
1,210
|
|
||
Regulatory liabilities (Note 9)
|
2,970
|
|
|
2,956
|
|
||
Deferred income taxes (Note 24)
|
2,686
|
|
|
2,298
|
|
||
Long-term debt (Note 16)
|
23,159
|
|
|
20,691
|
|
||
Capital lease and finance obligations (Note 17)
|
390
|
|
|
414
|
|
||
Total liabilities
|
34,595
|
|
|
31,073
|
|
||
Commitments and contingencies (Note 30)
|
|
|
|
||||
Equity
|
|
|
|
||||
Common shares
(1)
|
11,889
|
|
|
11,582
|
|
||
Preference shares (Note 20)
|
1,623
|
|
|
1,623
|
|
||
Additional paid-in capital
|
11
|
|
|
10
|
|
||
Accumulated other comprehensive income (Note 21)
|
928
|
|
|
61
|
|
||
Retained earnings
|
2,082
|
|
|
1,727
|
|
||
Shareholders' equity
|
16,533
|
|
|
15,003
|
|
||
Non-controlling interests
|
1,923
|
|
|
1,746
|
|
||
Total equity
|
18,456
|
|
|
16,749
|
|
||
Total liabilities and equity
|
$
|
53,051
|
|
|
$
|
47,822
|
|
|
|
|
|
||||
(1)
No par value. Unlimited authorized shares; 428.5 million and 421.1 million
issued and outstanding as at December 31, 2018 and 2017, respectively |
Approved on Behalf of the Board
|
||||||
|
/s/ Douglas J. Haughey
|
|
/s/ Tracey C. Ball
|
||||
|
|
||||||
|
Douglas J. Haughey,
|
Tracey C. Ball,
|
|||||
|
|||||||
See accompanying Notes to Consolidated Financial Statements
|
Director
|
|
Director
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
5
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
6
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
7
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
8
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
9
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
10
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
|
2018
|
2017
|
|||
(years)
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Distribution
|
|
|
|
|
|
|
|
Electric
|
5-80
|
33
|
|
5-80
|
33
|
|
Gas
|
14-95
|
35
|
|
14-95
|
34
|
Transmission
|
|
|
|
|
|
|
|
Electric
|
20-90
|
42
|
|
20-80
|
41
|
|
Gas
|
5-85
|
41
|
|
5-80
|
34
|
Generation
|
1-85
|
24
|
|
5-85
|
28
|
|
Other
|
3-70
|
15
|
|
3-70
|
14
|
|
11
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
|
2018
|
|
2017
|
||
(years)
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Computer software
|
3-10
|
4
|
|
3-10
|
4
|
|
Land, transmission and water rights
|
36-90
|
57
|
|
36-80
|
57
|
|
Other
|
10-100
|
13
|
|
10-100
|
10
|
|
12
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
13
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
14
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
15
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
16
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
17
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
18
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Sale of capacity from Waneta Expansion to FortisBC Electric
|
$
|
47
|
|
$
|
46
|
|
Lease of gas storage capacity and gas sales from Aitken Creek to
FortisBC Energy
|
25
|
|
24
|
|
|
19
|
|
|
REGULATED
|
|
NON-REGULATED
|
|
|
|||||||||||||||||||||||||||||||||
Year Ended
|
|
|
Energy
|
|
Inter-
|
|
||||||||||||||||||||||||||||||||
December 31, 2018
|
|
UNS
|
|
Central
|
|
|
FortisBC
|
|
Fortis
|
|
FortisBC
|
|
Other
|
|
Sub
|
|
|
Infra-
|
Corporate
|
|
segment
|
|
||||||||||||||||
(in millions)
|
ITC
|
|
Energy
|
|
Hudson
|
|
|
Energy
|
|
Alberta
|
|
Electric
|
|
Electric
|
|
total
|
|
|
structure
|
|
and Other
|
|
eliminations
|
Total
|
|
|||||||||||||
Revenue
|
$
|
1,504
|
|
$
|
2,202
|
|
$
|
924
|
|
|
$
|
1,187
|
|
$
|
579
|
|
$
|
408
|
|
$
|
1,412
|
|
$
|
8,216
|
|
|
$
|
184
|
|
$
|
—
|
|
$
|
(10
|
)
|
$
|
8,390
|
|
Energy supply costs
|
—
|
|
868
|
|
315
|
|
|
322
|
|
—
|
|
135
|
|
853
|
|
2,493
|
|
|
2
|
|
—
|
|
—
|
|
2,495
|
|
||||||||||||
Operating expenses
|
448
|
|
609
|
|
410
|
|
|
308
|
|
167
|
|
105
|
|
182
|
|
2,229
|
|
|
40
|
|
28
|
|
(10
|
)
|
2,287
|
|
||||||||||||
Depreciation and amortization
|
234
|
|
272
|
|
71
|
|
|
219
|
|
192
|
|
61
|
|
160
|
|
1,209
|
|
|
32
|
|
2
|
|
—
|
|
1,243
|
|
||||||||||||
Operating income
|
822
|
|
453
|
|
128
|
|
|
338
|
|
220
|
|
107
|
|
217
|
|
2,285
|
|
|
110
|
|
(30
|
)
|
—
|
|
2,365
|
|
||||||||||||
Other income, net
|
40
|
|
10
|
|
7
|
|
|
7
|
|
1
|
|
3
|
|
1
|
|
69
|
|
|
1
|
|
(10
|
)
|
—
|
|
60
|
|
||||||||||||
Finance charges
|
285
|
|
104
|
|
41
|
|
|
134
|
|
100
|
|
40
|
|
76
|
|
780
|
|
|
6
|
|
188
|
|
—
|
|
974
|
|
||||||||||||
Income tax expense
|
139
|
|
66
|
|
20
|
|
|
55
|
|
1
|
|
14
|
|
22
|
|
317
|
|
|
6
|
|
(158
|
)
|
—
|
|
165
|
|
||||||||||||
Net earnings
|
438
|
|
293
|
|
74
|
|
|
156
|
|
120
|
|
56
|
|
120
|
|
1,257
|
|
|
99
|
|
(70
|
)
|
—
|
|
1,286
|
|
||||||||||||
Non-controlling interests
|
77
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
—
|
|
15
|
|
93
|
|
|
27
|
|
—
|
|
—
|
|
120
|
|
||||||||||||
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
66
|
|
—
|
|
66
|
|
||||||||||||
Net earnings attributable
to common equity shareholders
|
$
|
361
|
|
$
|
293
|
|
$
|
74
|
|
|
$
|
155
|
|
$
|
120
|
|
$
|
56
|
|
$
|
105
|
|
$
|
1,164
|
|
|
$
|
72
|
|
$
|
(136
|
)
|
$
|
—
|
|
$
|
1,100
|
|
Goodwill
|
$
|
8,369
|
|
$
|
1,884
|
|
$
|
615
|
|
|
$
|
913
|
|
$
|
227
|
|
$
|
235
|
|
$
|
260
|
|
$
|
12,503
|
|
|
$
|
27
|
|
$
|
—
|
|
$
|
—
|
|
$
|
12,530
|
|
Total assets
|
19,798
|
|
10,182
|
|
3,670
|
|
|
6,815
|
|
4,691
|
|
2,244
|
|
4,119
|
|
51,519
|
|
|
1,478
|
|
127
|
|
(73
|
)
|
53,051
|
|
||||||||||||
Capital expenditures
|
998
|
|
599
|
|
245
|
|
|
486
|
|
433
|
|
106
|
|
300
|
|
3,167
|
|
|
44
|
|
7
|
|
—
|
|
3,218
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Revenue
|
$
|
1,575
|
|
$
|
2,080
|
|
$
|
872
|
|
|
$
|
1,198
|
|
$
|
600
|
|
$
|
398
|
|
$
|
1,363
|
|
$
|
8,086
|
|
|
$
|
226
|
|
$
|
1
|
|
$
|
(12
|
)
|
$
|
8,301
|
|
Energy supply costs
|
—
|
|
711
|
|
260
|
|
|
411
|
|
—
|
|
142
|
|
836
|
|
2,360
|
|
|
2
|
|
—
|
|
(1
|
)
|
2,361
|
|
||||||||||||
Operating expenses
|
433
|
|
609
|
|
399
|
|
|
300
|
|
198
|
|
90
|
|
171
|
|
2,200
|
|
|
49
|
|
12
|
|
(11
|
)
|
2,250
|
|
||||||||||||
Depreciation and amortization
|
220
|
|
260
|
|
65
|
|
|
198
|
|
190
|
|
62
|
|
150
|
|
1,145
|
|
|
32
|
|
2
|
|
—
|
|
1,179
|
|
||||||||||||
Operating income
|
922
|
|
500
|
|
148
|
|
|
289
|
|
212
|
|
104
|
|
206
|
|
2,381
|
|
|
143
|
|
(13
|
)
|
—
|
|
2,511
|
|
||||||||||||
Other income, net
|
37
|
|
19
|
|
5
|
|
|
22
|
|
2
|
|
2
|
|
1
|
|
88
|
|
|
1
|
|
28
|
|
(1
|
)
|
116
|
|
||||||||||||
Finance charges
|
259
|
|
101
|
|
41
|
|
|
116
|
|
93
|
|
37
|
|
74
|
|
721
|
|
|
5
|
|
189
|
|
(1
|
)
|
914
|
|
||||||||||||
Income tax expense
|
371
|
|
148
|
|
42
|
|
|
40
|
|
1
|
|
14
|
|
22
|
|
638
|
|
|
19
|
|
(69
|
)
|
—
|
|
588
|
|
||||||||||||
Net earnings
|
329
|
|
270
|
|
70
|
|
|
155
|
|
120
|
|
55
|
|
111
|
|
1,110
|
|
|
120
|
|
(105
|
)
|
—
|
|
1,125
|
|
||||||||||||
Non-controlling interests
|
57
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
—
|
|
13
|
|
71
|
|
|
26
|
|
—
|
|
—
|
|
97
|
|
||||||||||||
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
65
|
|
—
|
|
65
|
|
||||||||||||
Net earnings attributable
to common equity shareholders
|
$
|
272
|
|
$
|
270
|
|
$
|
70
|
|
|
$
|
154
|
|
$
|
120
|
|
$
|
55
|
|
$
|
98
|
|
$
|
1,039
|
|
|
$
|
94
|
|
$
|
(170
|
)
|
$
|
—
|
|
$
|
963
|
|
Goodwill
|
$
|
7,698
|
|
$
|
1,733
|
|
$
|
566
|
|
|
$
|
913
|
|
$
|
227
|
|
$
|
235
|
|
$
|
245
|
|
$
|
11,617
|
|
|
$
|
27
|
|
$
|
—
|
|
$
|
—
|
|
$
|
11,644
|
|
Total assets
|
17,581
|
|
8,596
|
|
3,188
|
|
|
6,418
|
|
4,454
|
|
2,197
|
|
3,814
|
|
46,248
|
|
|
1,605
|
|
76
|
|
(107
|
)
|
47,822
|
|
||||||||||||
Capital expenditures
|
982
|
|
534
|
|
220
|
|
|
446
|
|
414
|
|
105
|
|
302
|
|
3,003
|
|
|
21
|
|
—
|
|
—
|
|
3,024
|
|
|
20
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Electric and gas revenue
|
|
|
||||
United States
|
|
|
||||
ITC
|
$
|
1,539
|
|
$
|
1,583
|
|
UNS Energy
|
1,993
|
|
1,875
|
|
||
Central Hudson
|
963
|
|
814
|
|
||
Canada
|
|
|
||||
FortisBC Energy
|
1,136
|
|
1,244
|
|
||
FortisAlberta
|
554
|
|
593
|
|
||
FortisBC Electric
|
354
|
|
347
|
|
||
Newfoundland Power
|
651
|
|
666
|
|
||
Maritime Electric
|
200
|
|
191
|
|
||
FortisOntario
|
197
|
|
197
|
|
||
Caribbean
|
|
|
||||
Caribbean Utilities
|
253
|
|
222
|
|
||
FortisTCI
|
78
|
|
71
|
|
||
Total electric and gas revenue
|
7,918
|
|
7,803
|
|
||
Other services revenue
(1)
|
408
|
|
395
|
|
||
Revenue from contracts with customers
|
8,326
|
|
8,198
|
|
||
Alternative revenue
|
16
|
|
(46
|
)
|
||
Other revenue
|
48
|
|
149
|
|
||
Total revenue
|
$
|
8,390
|
|
$
|
8,301
|
|
(1)
|
Includes
$234 million
and
$217 million
from regulated operations for
2018
and
2017
, respectively
|
|
21
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Trade accounts receivable
|
$
|
538
|
|
$
|
460
|
|
Unbilled accounts receivable
|
575
|
|
562
|
|
||
Allowance for doubtful accounts
|
(33
|
)
|
(31
|
)
|
||
Total accounts receivable
|
1,080
|
|
991
|
|
||
Income tax receivable
|
91
|
|
8
|
|
||
Other
(1)
|
186
|
|
132
|
|
||
|
$
|
1,357
|
|
$
|
1,131
|
|
(1)
|
Consists of customer billings for non-core services, gas mitigation costs and collateral deposits for gas purchases at FortisBC Energy, and the fair value of derivative instruments
(Note 28)
|
(in millions)
|
2018
|
|
2017
|
|
||
Materials and supplies
|
$
|
280
|
|
$
|
238
|
|
Gas and fuel in storage
|
87
|
|
97
|
|
||
Coal inventory
|
31
|
|
32
|
|
||
|
$
|
398
|
|
$
|
367
|
|
|
22
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions
)
|
2018
|
|
2017
|
|
||
Regulatory assets
|
|
|
||||
Deferred income taxes (Notes 3 and 24)
|
$
|
1,532
|
|
$
|
1,403
|
|
Employee future benefits (Notes 3 and 25)
|
485
|
|
510
|
|
||
Deferred energy management costs
(i)
|
230
|
|
200
|
|
||
Deferred lease costs
(ii)
|
110
|
|
104
|
|
||
Deferred operating overhead costs
(iii)
|
103
|
|
91
|
|
||
Generation early retirement costs
(iv)
|
98
|
|
105
|
|
||
Rate stabilization and related accounts
(v)
|
90
|
|
95
|
|
||
Manufactured gas plant site remediation deferral (Note 18)
|
73
|
|
75
|
|
||
Derivatives (Notes 3 and 28)
|
57
|
|
87
|
|
||
Other regulatory assets
(vi)
|
400
|
|
375
|
|
||
Total regulatory assets
|
3,178
|
|
3,045
|
|
||
Less: Current portion
|
(324
|
)
|
(303
|
)
|
||
Long-term regulatory assets
|
$
|
2,854
|
|
$
|
2,742
|
|
|
|
|
||||
Regulatory liabilities
|
|
|
||||
Deferred income taxes (Notes 3 and 24)
|
$
|
1,574
|
|
$
|
1,484
|
|
Asset removal cost provision (Note 3)
|
1,169
|
|
1,095
|
|
||
Rate stabilization and related accounts
(v)
|
220
|
|
254
|
|
||
ROE complaints liability (Note 2)
|
206
|
|
182
|
|
||
Energy efficiency liability
(vii)
|
106
|
|
82
|
|
||
Renewable energy surcharge
(viii)
|
85
|
|
66
|
|
||
Electric and gas moderator account
(ix)
|
60
|
|
58
|
|
||
Employee future benefits (Notes 3 and 25)
|
37
|
|
47
|
|
||
Other regulatory liabilities
(vi)
|
169
|
|
178
|
|
||
Total regulatory liabilities
|
3,626
|
|
3,446
|
|
||
Less: Current portion
|
(656
|
)
|
(490
|
)
|
||
Long-term regulatory liabilities
|
$
|
2,970
|
|
$
|
2,956
|
|
(ii)
|
Deferred Lease Costs
|
(iii)
|
Deferred Operating Overhead Costs
|
|
23
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(iv)
|
Generation Early Retirement Costs
|
(v)
|
Rate Stabilization and Related Accounts
|
(vi)
|
Other Regulatory Assets and Liabilities
|
(vii)
|
Energy Efficiency Liability
|
(viii)
|
Renewable Energy Surcharge
|
(ix)
|
Electric and Gas Moderator Account
|
|
24
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
|
Cash
|
$
|
15
|
|
Accounts receivable and other current assets
|
3
|
|
|
PPE
|
718
|
|
|
Intangible assets
|
30
|
|
|
Total assets held for sale
|
$
|
766
|
|
|
|
||
Accounts payable and other current liabilities
|
$
|
2
|
|
Other liabilities
|
67
|
|
|
Total liabilities associated with assets held for sale
|
$
|
69
|
|
(in millions)
|
2018
|
|
2017
|
|
||
Supplemental Executive Retirement Plan
|
$
|
143
|
|
$
|
130
|
|
Renewable Energy Credits (Note 9
(viii)
)
|
88
|
|
62
|
|
||
Equity investment - BEL
|
76
|
|
73
|
|
||
Equity investment - Wataynikaneyap Partnership
|
43
|
|
22
|
|
||
Other investments
|
34
|
|
29
|
|
||
Defined benefit pension plan (Note 25)
|
26
|
|
31
|
|
||
Deferred compensation plan
|
26
|
|
24
|
|
||
Other
(1)
|
116
|
|
109
|
|
||
|
$
|
552
|
|
$
|
480
|
|
(1)
|
Other assets are generally recorded at cost and recovered or amortized over the estimated period of future benefit, where applicable. Other assets also include the fair value of derivatives
(Note 28)
.
|
|
25
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Cost
|
|
Accumulated Depreciation
|
|
Net Book Value
|
|
||||||
2018
|
|
|
|
|
|
|||||||
Distribution
|
|
|
|
|
|
|||||||
|
Electric
|
$
|
10,880
|
|
|
$
|
(3,076
|
)
|
|
$
|
7,804
|
|
|
Gas
|
4,767
|
|
|
(1,244
|
)
|
|
3,523
|
|
|||
Transmission
|
|
|
|
|
|
|
|
|
||||
|
Electric
|
14,665
|
|
|
(3,212
|
)
|
|
11,453
|
|
|||
|
Gas
|
2,214
|
|
|
(639
|
)
|
|
1,575
|
|
|||
Generation
|
6,164
|
|
|
(2,279
|
)
|
|
3,885
|
|
||||
Other
|
3,877
|
|
|
(1,251
|
)
|
|
2,626
|
|
||||
Assets under construction
|
1,478
|
|
|
—
|
|
|
1,478
|
|
||||
Land
|
310
|
|
|
—
|
|
|
310
|
|
||||
|
|
$
|
44,355
|
|
|
$
|
(11,701
|
)
|
|
$
|
32,654
|
|
2017
|
|
|||||||||||
Distribution
|
|
|
|
|
|
|||||||
|
Electric
|
$
|
9,963
|
|
|
$
|
(2,864
|
)
|
|
$
|
7,099
|
|
|
Gas
|
4,093
|
|
|
(1,157
|
)
|
|
2,936
|
|
|||
Transmission
|
|
|
|
|
|
|
|
|
||||
|
Electric
|
12,571
|
|
|
(2,838
|
)
|
|
9,733
|
|
|||
|
Gas
|
1,954
|
|
|
(596
|
)
|
|
1,358
|
|
|||
Generation
|
6,079
|
|
|
(1,996
|
)
|
|
4,083
|
|
||||
Other
|
3,608
|
|
|
(1,130
|
)
|
|
2,478
|
|
||||
Assets under construction
|
1,717
|
|
|
—
|
|
|
1,717
|
|
||||
Land
|
264
|
|
|
—
|
|
|
264
|
|
||||
|
|
$
|
40,249
|
|
|
$
|
(10,581
|
)
|
|
$
|
29,668
|
|
|
26
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
Ownership
|
|
Accumulated
|
|
Net Book
|
|
||||
(in millions, except as noted)
|
%
|
Cost
|
Depreciation
|
|
Value
|
|
||||
San Juan Unit 1
|
50.0
|
$
|
397
|
|
$
|
(183
|
)
|
$
|
214
|
|
Four Corners Units 4 and 5
|
7.0
|
239
|
|
(104
|
)
|
135
|
|
|||
Luna Energy Facility
|
33.3
|
79
|
|
(5
|
)
|
74
|
|
|||
Gila River Common Facilities
|
25.0
|
45
|
|
(16
|
)
|
29
|
|
|||
Springerville Coal Handling Facilities
|
83.0
|
284
|
|
(117
|
)
|
167
|
|
|||
Transmission Facilities
|
1.0-80.0
|
1,018
|
|
(397
|
)
|
621
|
|
|||
|
|
$
|
2,062
|
|
$
|
(822
|
)
|
$
|
1,240
|
|
|
|
Accumulated
|
|
Net Book
|
|
||||
(in millions
)
|
Cost
|
|
Amortization
|
|
Value
|
|
|||
2018
|
|
|
|
||||||
Computer software
|
$
|
860
|
|
$
|
(533
|
)
|
$
|
327
|
|
Land, transmission and water rights
|
855
|
|
(125
|
)
|
730
|
|
|||
Other
|
120
|
|
(58
|
)
|
62
|
|
|||
Assets under construction
|
81
|
|
—
|
|
81
|
|
|||
|
$
|
1,916
|
|
$
|
(716
|
)
|
$
|
1,200
|
|
|
|
|
|
||||||
2017
|
|
|
|
||||||
Computer software
|
$
|
784
|
|
$
|
(474
|
)
|
$
|
310
|
|
Land, transmission and water rights
|
743
|
|
(103
|
)
|
640
|
|
|||
Other
|
117
|
|
(49
|
)
|
68
|
|
|||
Assets under construction
|
63
|
|
—
|
|
63
|
|
|||
|
$
|
1,707
|
|
$
|
(626
|
)
|
$
|
1,081
|
|
|
27
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Balance, beginning of year
|
$
|
11,644
|
|
$
|
12,364
|
|
Acquisition of ITC
|
—
|
|
(6
|
)
|
||
Foreign currency translation impacts
(1)
|
886
|
|
(714
|
)
|
||
Balance, end of year
|
$
|
12,530
|
|
$
|
11,644
|
|
(1)
|
Relates to the translation of goodwill associated with the acquisitions of ITC, UNS Energy, Central Hudson, Caribbean Utilities and FortisTCI, whose functional currency is the US dollar
|
(in millions)
|
2018
|
|
2017
|
|
||
Trade accounts payable
|
$
|
679
|
|
$
|
696
|
|
Gas and fuel cost payable
|
281
|
|
146
|
|
||
Customer and other deposits
|
267
|
|
204
|
|
||
Interest payable
|
230
|
|
223
|
|
||
Accrued taxes other than income taxes
|
206
|
|
178
|
|
||
Dividends payable
|
199
|
|
185
|
|
||
Employee compensation and benefits payable
|
193
|
|
184
|
|
||
Fair value of derivatives (Note 28)
|
69
|
|
71
|
|
||
Manufactured gas plant site remediation (Note 18)
|
32
|
|
35
|
|
||
Defined benefit pension and OPEB liabilities (Note 25)
|
25
|
|
22
|
|
||
Other
|
108
|
|
109
|
|
||
|
$
|
2,289
|
|
$
|
2,053
|
|
|
28
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions
)
|
Maturity Date
|
2018
|
|
2017
|
|
|||
ITC
|
|
|
|
|||||
Secured US First Mortgage Bonds -
|
|
|
|
|||||
|
4.51% weighted average fixed rate (2017 - 4.67%)
|
2020-2055
|
$
|
2,652
|
|
$
|
2,063
|
|
Secured US Senior Notes -
|
|
|
|
|||||
|
4.19% weighted average fixed rate (2017 - 4.19%)
|
2040-2046
|
648
|
|
596
|
|
||
Unsecured US Senior Notes -
|
|
|
|
|||||
|
3.91% weighted average fixed rate (2017 - 3.91%)
|
2020-2043
|
3,751
|
|
3,451
|
|
||
Unsecured US Shareholder Note -
|
|
|
|
|||||
|
6.00% fixed rate (2017 - 6.00%)
|
2028
|
271
|
|
250
|
|
||
Unsecured US Term Loan Credit Agreement -
|
|
|
|
|||||
|
2.03% weighted average variable rate
|
n/a
|
—
|
|
63
|
|
||
UNS Energy
|
|
|
|
|||||
Unsecured US Tax-Exempt Bonds - 4.66% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2017 - 4.04%)
|
2020-2040
|
654
|
|
773
|
|
||
Unsecured US Fixed Rate Notes -
|
|
|
|
|||||
|
4.38% weighted average fixed rate (2017 - 4.26%)
|
2021-2048
|
1,943
|
|
1,411
|
|
||
Central Hudson
|
|
|
|
|||||
Unsecured US Promissory Notes - 4.43% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2017 - 4.28%)
|
2019-2057
|
938
|
|
770
|
|
||
FortisBC Energy
|
|
|
|
|||||
Unsecured Debentures -
|
|
|
|
|||||
|
5.03% weighted average fixed rate (2017 - 5.13%)
|
2026-2048
|
2,595
|
|
2,395
|
|
||
FortisAlberta
|
|
|
|
|||||
Unsecured Debentures -
|
|
|
|
|||||
|
4.64% weighted average fixed rate (2017 - 4.70%)
|
2024-2052
|
2,185
|
|
2,035
|
|
||
FortisBC Electric
|
|
|
|
|||||
Secured Debentures -
|
|
|
|
|||||
|
8.80% fixed rate (2017 - 8.80%)
|
2023
|
25
|
|
25
|
|
||
Unsecured Debentures -
|
|
|
|
|||||
|
5.05%
weighted average fixed rate (2017 - 5.05%)
|
2021-2050
|
710
|
|
710
|
|
||
Other Electric
|
|
|
|
|||||
Secured First Mortgage Sinking Fund Bonds -
|
|
|
|
|||||
|
6.14% weighted average fixed rate (2017 - 6.14%)
|
2020-2057
|
578
|
|
585
|
|
||
Secured First Mortgage Bonds -
|
|
|
|
|||||
|
5.66% weighted average fixed rate (2017 - 6.19%)
|
2025-2061
|
220
|
|
195
|
|
||
Unsecured Senior Notes -
|
|
|
|
|||||
|
4.45% weighted average fixed rate (2017 - 6.11%)
|
2041-2048
|
152
|
|
104
|
|
||
Unsecured US Senior Loan Notes and Bonds - 4.76% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2017 - 4.80%)
|
2020-2048
|
584
|
|
525
|
|
||
Corporate
|
|
|
|
|||||
Unsecured US Senior Notes and Promissory Notes -
|
|
|
|
|||||
|
3.41% weighted average fixed rate (2017 - 3.41%)
|
2019-2044
|
4,398
|
|
4,046
|
|
||
Unsecured Debentures -
|
|
|
|
|||||
|
6.50% weighted average fixed rate (2017 - 6.50%)
|
2039
|
200
|
|
200
|
|
||
Unsecured Senior Notes - 2.85% fixed rate (2017 - 2.85%)
|
2023
|
500
|
|
500
|
|
|||
Long-term classification of credit facility borrowings
|
1,066
|
|
671
|
|
||||
Fair value adjustment - ITC acquisition
|
|
161
|
|
167
|
|
|||
Total long-term debt (Note 28)
|
|
24,231
|
|
21,535
|
|
|||
Less: Deferred financing costs and debt discounts
|
|
(146
|
)
|
(139
|
)
|
|||
Less: Current installments of long-term debt
|
|
(926
|
)
|
(705
|
)
|
|||
|
|
|
$
|
23,159
|
|
$
|
20,691
|
|
|
29
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions, except %)
|
Month Issued
|
Interest Rate
(%)
|
|
Maturity
|
|
Amount
|
|
Use of Proceeds
|
|
|
ITC
|
|
|
|
|
|
|
||||
First mortgage bonds
|
March
|
4.00
|
|
2053
|
|
US
|
225
|
|
(1) (2) (3) (4)
|
|
First mortgage bonds
|
November
|
4.32
|
|
2051
|
|
US
|
175
|
|
(2) (3) (4)
|
|
UNS Energy
|
|
|
|
|
|
|
||||
Unsecured notes
|
November
|
4.85
|
|
2048
|
|
US
|
300
|
|
(1) (4)
|
|
Central Hudson
|
|
|
|
|
|
|
||||
Unsecured notes
|
June
|
4.27
|
|
2048
|
|
US
|
25
|
|
(3) (4)
|
|
Unsecured notes
|
October
|
3.99
|
|
2026
|
|
US
|
40
|
|
(1) (3) (4)
|
|
Unsecured notes
|
October
|
4.21
|
|
2033
|
|
US
|
40
|
|
(1) (3) (4)
|
|
FortisBC Energy
|
|
|
|
|
|
|
||||
Unsecured debentures
|
December
|
3.85
|
|
2048
|
|
200
|
|
(2) (4)
|
|
|
FortisAlberta
|
|
|
|
|
|
|
||||
Unsecured debentures
|
September
|
3.73
|
|
2048
|
|
150
|
|
(2) (4)
|
|
|
FortisOntario
|
|
|
|
|
|
|
||||
Unsecured notes
|
August
|
4.10
|
|
2048
|
|
100
|
|
(1) (4)
|
|
|
Maritime Electric
|
|
|
|
|
|
|
||||
First mortgage bonds
|
December
|
4.15
|
|
2058
|
|
40
|
|
(2) (4)
|
|
|
FortisTCI
|
|
|
|
|
|
|
||||
Unsecured notes
|
February
|
(5
|
)
|
2023
|
|
US
|
25
|
|
(6
|
)
|
Unsecured non-revolving term loan
(7)
|
September
|
(5
|
)
|
2025
|
|
US
|
5
|
|
(4
|
)
|
(1)
|
Repay maturing long-term debt
|
(2)
|
Repay credit facility borrowings
|
(3)
|
Finance capital expenditures
|
(4)
|
General corporate purposes
|
(5)
|
Floating rate of a one-month LIBOR plus a spread of
1.75%
|
(6)
|
Repay a hurricane-related emergency standby loan
|
(7)
|
Maximum amount of borrowings under this agreement is US
$10 million
.
|
|
30
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
Total
|
|
|
(year)
|
(in millions)
|
|
|
2019
|
$
|
926
|
|
2020
|
731
|
|
|
2021
|
1,324
|
|
|
2022
|
1,125
|
|
|
2023
|
1,605
|
|
|
Thereafter
|
18,520
|
|
|
|
$
|
24,231
|
|
(in millions)
|
Regulated
Utilities |
|
Corporate
and Other |
|
2018
|
|
2017
|
|
||||
Total credit facilities
|
$
|
3,780
|
|
$
|
1,385
|
|
$
|
5,165
|
|
$
|
4,952
|
|
Credit facilities utilized:
|
|
|
|
|
|
|
|
|
||||
Short-term borrowings
(1)
|
(60
|
)
|
—
|
|
(60
|
)
|
(209
|
)
|
||||
Long-term debt
(including current portion)
(2)
|
(731
|
)
|
(335
|
)
|
(1,066
|
)
|
(671
|
)
|
||||
Letters of credit outstanding
|
(65
|
)
|
(54
|
)
|
(119
|
)
|
(129
|
)
|
||||
Credit facilities unutilized
|
$
|
2,924
|
|
$
|
996
|
|
$
|
3,920
|
|
$
|
3,943
|
|
(2)
|
The weighted average interest rate was approximately
3.3%
(
December 31, 2017
-
2.5%
)
. The current portion was
$735 million
(
December 31, 2017
-
$312 million
).
|
|
31
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Amount
|
|
Maturity
|
|
Unsecured committed revolving credit facilities
|
|
|
||
Regulated utilities
|
|
|
||
ITC
(1)
|
US
|
900
|
|
October 2022
|
UNS Energy
|
US
|
500
|
|
October 2022
|
Central Hudson
|
US
|
250
|
|
(2)
|
FortisBC Energy
|
700
|
|
August 2023
|
|
FortisAlberta
|
250
|
|
August 2023
|
|
FortisBC Electric
|
150
|
|
April 2023
|
|
Other Electric
|
190
|
|
(3)
|
|
Other Electric
|
US
|
50
|
|
January 2020
|
Corporate and Other
|
1,350
|
|
(4)
|
|
Other facilities
|
|
|
||
Central Hudson - uncommitted credit facility
|
US
|
40
|
|
n/a
|
FortisBC Electric - unsecured demand overdraft facility
|
10
|
|
n/a
|
|
Other Electric - unsecured demand facilities
|
25
|
|
n/a
|
|
Other Electric - unsecured demand facility and emergency
standby loan
|
US
|
60
|
|
April 2019
|
Corporate and Other - unsecured non-revolving facility
|
35
|
|
n/a
|
(1)
|
ITC also has a US
$400 million
commercial paper program, under which
no
amounts were outstanding as at
December 31, 2018
.
|
(2)
|
US
$50 million
in July 2020 and US
$200 million
in October 2020
|
(3)
|
$50 million
in February 2019,
$40 million
in June 2021, and
$100 million
in August 2023
|
(4)
|
$1.3 billion
in July 2023, with the option to increase by an amount up to
$500 million
, and
$50 million
in April 2021
|
|
32
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
|
|
Total
|
|
|
(year)
|
|
|
(in millions)
|
|
|
2019
|
|
|
$
|
313
|
|
2020
|
|
|
77
|
|
|
2021
|
|
|
80
|
|
|
2022
|
|
|
49
|
|
|
2023
|
|
|
47
|
|
|
Thereafter
|
|
|
1,885
|
|
|
|
|
|
$
|
2,451
|
|
Less: Imputed interest and executory costs
|
|
|
(1,809
|
)
|
|
Total capital lease and finance obligations
|
|
|
642
|
|
|
Less: Current installments
|
|
|
(252
|
)
|
|
|
|
|
$
|
390
|
|
|
33
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
|||
Defined benefit pension plans (Note 25)
|
$
|
391
|
|
$
|
393
|
|
|
OPEBs (Note 25)
|
350
|
|
381
|
|
|||
Asset retirement obligations (Note 3)
|
111
|
|
71
|
|
|||
Customer and other deposits
|
57
|
|
67
|
|
|||
Stock-based compensation plans (Note 22)
|
56
|
|
39
|
|
|||
Mine reclamation obligations
(1)
|
40
|
|
40
|
|
|||
Manufactured gas plant site remediation
(2)
|
32
|
|
34
|
|
|||
Fair value of derivatives (Note 28)
|
30
|
|
37
|
|
|||
Deferred compensation plan (Note 11)
|
29
|
|
28
|
|
|||
Waneta Partnership promissory note (Note 10)
|
—
|
|
63
|
|
|||
Other
(3)
|
42
|
|
57
|
|
|||
|
$
|
1,138
|
|
$
|
1,210
|
|
(1)
|
TEP pays ongoing reclamation costs related to
three
coal mines that supply generating facilities in which it has an ownership interest but does not operate. Costs are deferred as a regulatory asset and recovered from customers as permitted by the regulator. TEP's share of the reclamation costs is estimated to be
$90 million
(US
$66 million
) upon expiry of the coal agreements between 2019 and 2031. The present value of the estimated future liability is shown in the table above.
|
(2)
|
Environmental regulations require Central Hudson to investigate sites at which the Company or its predecessors once owned and/or operated manufactured gas plants and, if necessary, remediate those sites. Costs are accrued based on the amounts that can be reasonably estimated. As at
December 31, 2018
, an obligation of
$64 million
(US
$47 million
) was recognized, including a current portion of
$32 million
(US
$23 million
) recognized in accounts payable and other current liabilities
(Note 15)
. Central Hudson has notified its insurers that it intends to seek reimbursement where insurance coverage exists. Differences between actual costs and the associated rate allowances are deferred as a regulatory asset for future recovery (
Note 9
).
|
(3)
|
Primarily includes long-term accrued liabilities, deferred lease revenue, funds received in advance of expenditures and unrecognized tax benefits.
|
|
2018
|
2017
|
||||||||||||||
|
Net Earnings
|
|
Weighted
|
|
|
Net Earnings
|
|
Weighted
|
|
|
||||||
|
to Common
|
|
Average
|
|
|
to Common
|
|
Average
|
|
|
||||||
|
Shareholders
|
|
Shares
|
|
|
Shareholders
|
|
Shares
|
|
|
||||||
|
(in millions)
|
|
(in millions)
|
|
EPS
|
|
(in millions)
|
|
(in millions)
|
|
EPS
|
|
||||
Basic EPS
|
$
|
1,100
|
|
424.7
|
|
$
|
2.59
|
|
$
|
963
|
|
415.5
|
|
$
|
2.32
|
|
Potential dilutive effect of
stock options
|
—
|
|
0.5
|
|
|
—
|
|
0.7
|
|
|
||||||
Diluted EPS
|
$
|
1,100
|
|
425.2
|
|
$
|
2.59
|
|
$
|
963
|
|
416.2
|
|
$
|
2.31
|
|
|
34
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
Issued and outstanding
|
2018
|
2017
|
||||||||||
First Preference Shares
|
Number
|
|
|
|
Number
|
|
|
|
||||
of Shares
|
|
|
Amount
|
|
of Shares
|
|
|
Amount
|
|
|||
(in thousands)
|
|
|
(in millions)
|
|
(in thousands)
|
|
|
(in millions)
|
|
|||
Series F
|
5,000
|
|
|
$
|
122
|
|
5,000
|
|
|
$
|
122
|
|
Series G
|
9,200
|
|
|
225
|
|
9,200
|
|
|
225
|
|
||
Series H
|
7,025
|
|
|
172
|
|
7,025
|
|
|
172
|
|
||
Series I
|
2,975
|
|
|
73
|
|
2,975
|
|
|
73
|
|
||
Series J
|
8,000
|
|
|
196
|
|
8,000
|
|
|
196
|
|
||
Series K
|
10,000
|
|
|
244
|
|
10,000
|
|
|
244
|
|
||
Series M
|
24,000
|
|
|
591
|
|
24,000
|
|
|
591
|
|
||
|
66,200
|
|
|
$
|
1,623
|
|
66,200
|
|
|
$
|
1,623
|
|
|
|
|
|
Earliest
|
|
|
|||||
|
|
|
Reset
|
|
Redemption
|
|
Right to
|
|
|||
|
Initial
|
|
Annual
|
|
Dividend
|
|
and/or
|
Redemption
|
|
Convert on
|
|
|
Yield
|
|
Dividend
|
|
Yield
|
|
Conversion
|
Value
|
|
a One-For-
|
|
First Preference Shares
(1) (2)
|
(%)
|
|
($)
|
|
(%)
|
|
Option Date
|
($)
|
|
One Basis
|
|
Perpetual fixed rate
|
|
|
|
|
|
|
|||||
Series F
|
4.90
|
|
1.2250
|
|
—
|
|
December 1, 2011
|
25.00
|
|
—
|
|
Series J
(3)
|
4.75
|
|
1.1875
|
|
—
|
|
December 1, 2017
|
25.75
|
|
—
|
|
Fixed rate reset
(4) (5)
|
|
|
|
|
|
|
|||||
Series G
(6)
|
5.25
|
|
1.0983
|
|
2.13
|
|
September 1, 2013
|
25.00
|
|
—
|
|
Series H
|
4.25
|
|
0.6250
|
|
1.45
|
|
June 1, 2015
|
25.00
|
|
Series I
|
|
Series K
|
4.00
|
|
1.0000
|
|
2.05
|
|
March 1, 2019
|
25.00
|
|
Series L
|
|
Series M
|
4.10
|
|
1.0250
|
|
2.48
|
|
December 1, 2019
|
25.00
|
|
Series N
|
|
Floating rate reset
(5) (7)
|
|
|
|
|
|
|
|||||
Series I
(3)
|
2.10
|
|
—
|
|
1.45
|
|
June 1, 2015
|
25.50
|
|
Series H
|
|
Series L
|
—
|
|
—
|
|
2.05
|
|
March 1, 2024
|
—
|
|
Series K
|
|
Series N
|
—
|
|
—
|
|
2.48
|
|
December 1, 2024
|
—
|
|
Series M
|
|
(1
)
|
Holders are entitled to receive a fixed or floating cumulative quarterly cash dividend as and when declared by the Board of Directors of the Corporation, payable in equal installments on the first day of each quarter.
|
(2
)
|
On or after the specified redemption dates, the Corporation has the option to redeem for cash the outstanding First Preference Shares, in whole or in part, at the specified per share redemption value plus all accrued and unpaid dividends up to but excluding the dates fixed for redemption, and in the case of the First Preference Shares that reset, on every fifth anniversary date thereafter.
|
(3)
|
First Preference Shares, Series J were redeemable at
$26.00
until December 1, 2018, decreasing by
$0.25
each year until December 1, 2021 and redeemable at
$25.00
per share thereafter. First Preference Shares, Series I are redeemable at
$25.50
per share, up to but excluding June 1, 2020, and at
$25.00
per share on June 1, 2020, and on every fifth anniversary date thereafter.
|
(4
)
|
On the redemption and/or conversion option date, and each
five
-year anniversary thereafter, the reset annual dividend per share will be determined by multiplying
$25.00
per share by the annual fixed dividend rate, which is the sum of the
five
-year Government of Canada Bond Yield on the applicable reset date, plus the applicable reset dividend yield.
|
(5)
|
On each conversion option date, the holders have the option, subject to certain conditions, to convert any or all of their Shares into an equal number of Cumulative Redeemable First Preference Shares of a specified series.
|
(6)
|
The annual dividend per share for the First Preference Shares, Series G was reset from
$0.9708
to
$1.0983
for the five-year period from September 1, 2018 up to but excluding September 1, 2023.
|
(7)
|
The floating quarterly dividend rate will be reset every quarter based on the then current three‑month Government of Canada Treasury Bill rate plus the applicable reset dividend yield.
|
|
35
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Opening Balance
|
|
Net Change
|
|
Ending Balance
|
|
|||
2018
|
|
|
|
||||||
Unrealized foreign currency translation gains (losses)
|
|
|
|
||||||
On net investments in foreign operations
|
$
|
247
|
|
$
|
1,223
|
|
$
|
1,470
|
|
On hedges of net investments in foreign operations
|
(172
|
)
|
(372
|
)
|
(544
|
)
|
|||
Income tax (expense) recovery
|
(1
|
)
|
11
|
|
10
|
|
|||
|
74
|
|
862
|
|
936
|
|
|||
Other
|
|
|
|
||||||
Cash flow hedges (Note 28)
|
10
|
|
1
|
|
11
|
|
|||
Unrealized employee future benefits (losses) gains (Note 25)
|
(26
|
)
|
6
|
|
(20
|
)
|
|||
Income tax recovery (expense)
|
3
|
|
(2
|
)
|
1
|
|
|||
|
(13
|
)
|
5
|
|
(8
|
)
|
|||
Accumulated other comprehensive income
|
$
|
61
|
|
$
|
867
|
|
$
|
928
|
|
|
|
|
|
||||||
2017
|
|
|
|
||||||
Unrealized foreign currency translation gains (losses)
|
|
|
|
||||||
On net investments in foreign operations
|
$
|
1,227
|
|
$
|
(980
|
)
|
$
|
247
|
|
On hedges of net investments in foreign operations
|
(472
|
)
|
300
|
|
(172
|
)
|
|||
Income tax recovery (expense)
|
1
|
|
(2
|
)
|
(1
|
)
|
|||
|
756
|
|
(682
|
)
|
74
|
|
|||
Other
|
|
|
|
||||||
Cash flow hedges (Note 28)
|
8
|
|
2
|
|
10
|
|
|||
Unrealized employee future benefits losses (Note 25)
|
(22
|
)
|
(4
|
)
|
(26
|
)
|
|||
Income tax recovery
|
3
|
|
—
|
|
3
|
|
|||
|
(11
|
)
|
(2
|
)
|
(13
|
)
|
|||
Accumulated other comprehensive income
|
$
|
745
|
|
$
|
(684
|
)
|
$
|
61
|
|
|
36
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
2018
|
2017
|
|
|||
|
February
|
|
March
|
|
February
|
|
Options granted
(#)
|
721,536
|
|
39,972
|
|
774,924
|
|
Exercise price
($)
(1)
|
41.27
|
|
42.00
|
|
42.36
|
|
Grant date fair value
($)
|
3.43
|
|
4.08
|
|
3.22
|
|
Valuation assumptions:
|
|
|
|
|||
Dividend yield
(%)
(2)
|
3.7
|
|
3.7
|
|
3.8
|
|
Expected volatility
(%)
(3)
|
15.5
|
|
15.7
|
|
16.1
|
|
Risk-free interest rate
(%)
(4)
|
2.1
|
|
2.0
|
|
1.2
|
|
Weighted average expected life
(years)
(5)
|
5.6
|
|
5.6
|
|
5.6
|
|
(1)
|
Five
-day VWAP immediately preceding the grant date
|
(2)
|
Reflects average annual dividend yield up to the grant date and the weighted average expected life of the options
|
(3)
|
Reflects historical experience over a period equal to the weighted average expected life of the options
|
(4)
|
Government of Canada benchmark bond yield at the grant date that covers the weighted average expected life of the options
|
(5)
|
Reflects historical experience
|
|
Total Options
|
|
Non-vested Options
(1)
|
||||||||||
|
Number of Options
|
|
|
Weighted Average
Exercise Price |
|
|
Number of Options
|
|
|
Weighted Average
Grant Date Fair Value |
|
||
Options outstanding, January 1, 2018
|
3,702,294
|
|
|
$
|
36.65
|
|
|
1,812,319
|
|
|
$
|
2.86
|
|
Granted
|
761,508
|
|
|
$
|
41.31
|
|
|
761,508
|
|
|
$
|
3.46
|
|
Exercised
|
(357,120
|
)
|
|
$
|
33.49
|
|
|
n/a
|
|
|
n/a
|
|
|
Vested
|
n/a
|
|
|
n/a
|
|
|
(711,484
|
)
|
|
$
|
2.88
|
|
|
Cancelled/Forfeited
|
(91,216
|
)
|
|
$
|
40.44
|
|
|
(91,216
|
)
|
|
$
|
3.08
|
|
Options outstanding, December 31, 2018
|
4,015,466
|
|
|
$
|
37.73
|
|
|
1,771,127
|
|
|
$
|
3.10
|
|
Options vested, December 31, 2018
(2)
|
2,244,339
|
|
|
$
|
35.40
|
|
|
|
|
|
(1)
|
As at
December 31, 2018
, there was
$5 million
of unrecognized compensation expense related to stock options not yet vested, which is expected to be recognized over a weighted average period of approximately
three years
.
|
(2)
|
As at
December 31, 2018
, the weighted average remaining term of vested options was
six years
with an aggregate intrinsic value of
$23 million
.
|
|
37
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Stock option expense recognized
|
$
|
2
|
|
$
|
3
|
|
Stock options exercised:
|
|
|
|
|
||
Cash received for exercise price
|
12
|
|
40
|
|
||
Intrinsic value realized by employees
|
3
|
|
15
|
|
||
Fair value of options that vested
|
2
|
|
2
|
|
|
2018
|
|
2017
|
|
||
Number of Units
|
|
|
||||
Beginning of year
|
184,795
|
|
199,411
|
|
||
Granted
|
32,132
|
|
31,453
|
|
||
Notional dividends reinvested
|
7,518
|
|
7,294
|
|
||
Paid out
|
(47,898
|
)
|
(53,363
|
)
|
||
End of year
|
176,547
|
|
184,795
|
|
||
|
|
|
||||
Additional Information
(in millions)
|
|
|
||||
Compensation expense recognized
|
$
|
2
|
|
$
|
3
|
|
Cash payout
(1)
|
2
|
|
2
|
|
||
Accrued liability as at December 31
(2)
|
8
|
|
9
|
|
(1)
|
Reflects a weighted-average payout price of
$43.15
per DSU (
2017
-
$45.37
)
|
(2)
|
Recognized at the respective December 31
st
VWAP
(Note 3)
and included in long-term other liabilities
(Note 18)
|
|
38
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
2018
|
|
2017
|
|
||
Number of Units
|
|
|
||||
Beginning of year
|
1,350,960
|
|
931,951
|
|
||
Granted
|
668,995
|
|
711,749
|
|
||
Notional dividends reinvested
|
66,280
|
|
44,893
|
|
||
Paid out
|
(280,993
|
)
|
(239,509
|
)
|
||
Cancelled/forfeited
|
(42,471
|
)
|
(16,910
|
)
|
||
Transferred to RSU Plan
|
—
|
|
(81,214
|
)
|
||
End of year
|
1,762,771
|
|
1,350,960
|
|
||
|
|
|
||||
Additional Information
(in millions)
|
|
|
||||
Compensation expense recognized
|
$
|
22
|
|
$
|
26
|
|
Compensation expense unrecognized
(1)
|
27
|
|
17
|
|
||
Cash payout
(2)
|
14
|
|
11
|
|
||
Accrued liability as at December 31
(3)
|
50
|
|
41
|
|
||
Aggregate intrinsic value as at December 31
(4)
|
77
|
|
58
|
|
(1)
|
Relates to unvested PSUs and is expected to be recognized over a weighted-average period of
two years
|
(2)
|
Reflects a weighted-average payout price of
$46.01
per PSU and a payout percentage of
109%
(
2017
- $
41.46
and
113%
, respectively)
|
(3)
|
Recognized at the respective December 31
st
VWAP
(Note 3)
and included in accounts payable and other current liabilities and in long-term other liabilities (Notes
15
and
18
)
|
(4)
|
Relates to outstanding PSUs and reflects a weighted-average contractual life of
one year
|
|
39
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
2018
|
|
2017
|
|
||
Number of Units
|
|
|
||||
Beginning of year
|
482,763
|
|
123,612
|
|
||
Granted
|
305,686
|
|
349,496
|
|
||
Notional dividends reinvested
|
26,263
|
|
15,407
|
|
||
Paid out
|
(75,427
|
)
|
(74,876
|
)
|
||
Cancelled/forfeited
|
(22,267
|
)
|
(12,090
|
)
|
||
Transferred from PSU plan
|
—
|
|
81,214
|
|
||
End of year
|
717,018
|
|
482,763
|
|
||
|
|
|
||||
Additional Information
(in millions)
|
|
|
||||
Compensation expense recognized
|
$
|
11
|
|
$
|
8
|
|
Compensation expense unrecognized
(1)
|
15
|
|
11
|
|
||
Cash payout
(2)
|
3
|
|
3
|
|
||
Accrued liability as at December 31
(3)
|
19
|
|
11
|
|
||
Aggregate intrinsic value as at December 31
(4)
|
34
|
|
22
|
|
(1)
|
Relates to unvested RSUs and is expected to be recognized over a weighted-average period of
two years
|
(2)
|
Reflects a weighted-average payout price of
$45.55
per RSU (
2017
- $
43.42
)
|
(3)
|
Recognized at the respective December 31
st
VWAP
(Note 3)
and included in accounts payable and other current liabilities and in long-term other liabilities (Notes
15
and
18
)
|
(4)
|
Relates to outstanding RSUs and reflects a weighted-average contractual life of
one year
|
(in millions)
|
2018
|
|
2017
|
|
||
Equity component of AFUDC
|
$
|
64
|
|
$
|
74
|
|
Interest income
|
15
|
|
14
|
|
||
Equity (loss) income - BEL
|
(1
|
)
|
4
|
|
||
Net periodic pension cost
|
(1
|
)
|
(11
|
)
|
||
Net foreign exchange gain
(1)
|
—
|
|
26
|
|
||
Other
|
(17
|
)
|
9
|
|
||
|
$
|
60
|
|
$
|
116
|
|
(1)
|
Includes a one-time
$21 million
unrealized foreign exchange gain on US dollar-denominated affiliate loan in 2017
|
|
40
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Gross deferred income tax assets
|
|
|
||||
Regulatory liabilities
|
$
|
635
|
|
$
|
596
|
|
Tax loss and credit carryforwards
|
522
|
|
571
|
|
||
Employee future benefits
|
153
|
|
143
|
|
||
Unrealized foreign exchange losses on long-term debt
|
69
|
|
28
|
|
||
Other
|
76
|
|
51
|
|
||
|
1,455
|
|
1,389
|
|
||
Valuation allowance
|
(56
|
)
|
(44
|
)
|
||
Net deferred income tax asset
|
$
|
1,399
|
|
$
|
1,345
|
|
|
|
|
||||
Gross deferred income tax liabilities
|
|
|
||||
PPE
|
$
|
(3,780
|
)
|
$
|
(3,353
|
)
|
Regulatory assets
|
(203
|
)
|
(203
|
)
|
||
Intangible assets
|
(102
|
)
|
(87
|
)
|
||
|
(4,085
|
)
|
(3,643
|
)
|
||
Net deferred income tax liability
|
$
|
(2,686
|
)
|
$
|
(2,298
|
)
|
(in millions)
|
2018
|
|
2017
|
|
||
Beginning of year
|
$
|
28
|
|
$
|
23
|
|
Additions related to the current year
|
6
|
|
13
|
|
||
Adjustments related to prior years and U.S. Tax Reform
|
4
|
|
(8
|
)
|
||
End of year
|
$
|
38
|
|
$
|
28
|
|
|
41
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Canadian
|
|
|
||||
Earnings before income tax expense
|
$
|
376
|
|
$
|
461
|
|
|
|
|
||||
Current income tax
|
51
|
|
41
|
|
||
Deferred income tax
|
(25
|
)
|
16
|
|
||
Total Canadian
|
$
|
26
|
|
$
|
57
|
|
|
|
|
||||
Foreign
|
|
|
||||
Earnings before income tax expense
|
$
|
1,075
|
|
$
|
1,252
|
|
|
|
|
||||
Current income tax
|
(22
|
)
|
3
|
|
||
Deferred income tax
|
161
|
|
528
|
|
||
Total Foreign
|
$
|
139
|
|
$
|
531
|
|
Income tax expense
|
$
|
165
|
|
$
|
588
|
|
(in millions, except %)
|
2018
|
|
2017
|
|
||
Earnings before income tax expense
|
$
|
1,451
|
|
$
|
1,713
|
|
Combined Canadian federal and provincial statutory income tax rate
|
28.5
|
%
|
28.0
|
%
|
||
Expected federal and provincial taxes at statutory rate
|
$
|
414
|
|
$
|
480
|
|
Increase (decrease) resulting from:
|
|
|
||||
Enactment of U.S. Tax Reform
(1)
|
—
|
|
168
|
|
||
Foreign and other statutory rate differentials
|
(110
|
)
|
31
|
|
||
Remeasurement of deferred tax liabilities
|
(44
|
)
|
—
|
|
||
AFUDC
|
(14
|
)
|
(26
|
)
|
||
Effects of rate-regulated accounting:
|
|
|
||||
Difference between depreciation claimed for income tax and accounting purposes
|
(34
|
)
|
(26
|
)
|
||
Items capitalized for accounting purposes but expensed for income tax purposes
|
(21
|
)
|
(21
|
)
|
||
Other
|
(26
|
)
|
(18
|
)
|
||
Income tax expense
|
$
|
165
|
|
$
|
588
|
|
Effective tax rate
|
11.4
|
%
|
34.3
|
%
|
(1)
|
In 2017 the
Tax Cuts and Jobs Act
implemented significant changes to U.S. tax legislation, including a reduction in the U.S. federal corporate income tax from 35% to 21%, effective January 1, 2018. The Corporation's U.S. utilities and holding companies were required to remeasure their deferred tax assets and liabilities at the new corporate income tax rate as at the date of enactment. The one-time remeasurement resulted in an unfavourable earnings impact of
$168 million
recognized in deferred income tax expense (
$146 million
after non-controlling interest).
|
|
42
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Expiring Year
|
2018
|
|
|
Canadian
|
|
|
||
Capital loss
|
n/a
|
$
|
59
|
|
Non-capital loss
|
2025-2038
|
387
|
|
|
Other tax credits
|
2026-2037
|
2
|
|
|
|
|
448
|
|
|
Unrecognized
|
|
(15
|
)
|
|
|
|
433
|
|
|
Foreign
|
|
|
||
Federal and state net operating loss
|
2022-2038
|
2,130
|
|
|
Other tax credits
|
2021-2038
|
115
|
|
|
|
|
2,245
|
|
|
Total income tax carryforwards recognized as at December 31
|
|
$
|
2,678
|
|
|
43
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
2018 Target Allocation
|
|
|
||
(weighted-average %)
|
2018
|
|
2017
|
|
|
Equities
|
46
|
45
|
|
47
|
|
Fixed income
|
47
|
47
|
|
46
|
|
Real estate
|
6
|
7
|
|
6
|
|
Cash and other
|
1
|
1
|
|
1
|
|
|
100
|
100
|
|
100
|
|
(in millions)
|
Level 1
(1)
|
|
Level 2
(1)
|
|
Level 3
(1)
|
|
Total
|
|
||||
2018
|
|
|
|
|
||||||||
Equities
|
$
|
508
|
|
$
|
885
|
|
$
|
—
|
|
$
|
1,393
|
|
Fixed income
|
144
|
|
1,338
|
|
—
|
|
1,482
|
|
||||
Real estate
|
—
|
|
14
|
|
190
|
|
204
|
|
||||
Private equities
|
—
|
|
—
|
|
25
|
|
25
|
|
||||
Cash and other
|
8
|
|
11
|
|
—
|
|
19
|
|
||||
|
$
|
660
|
|
$
|
2,248
|
|
$
|
215
|
|
$
|
3,123
|
|
2017
|
|
|
|
|
||||||||
Equities
|
$
|
522
|
|
$
|
949
|
|
$
|
—
|
|
$
|
1,471
|
|
Fixed income
|
133
|
|
1,289
|
|
—
|
|
1,422
|
|
||||
Real estate
|
—
|
|
13
|
|
168
|
|
181
|
|
||||
Private equities
|
—
|
|
—
|
|
22
|
|
22
|
|
||||
Cash and other
|
8
|
|
14
|
|
—
|
|
22
|
|
||||
|
$
|
663
|
|
$
|
2,265
|
|
$
|
190
|
|
$
|
3,118
|
|
(1)
|
Refer to
Note 28
for a description of the fair value hierarchy.
|
(in millions)
|
2018
|
|
2017
|
|
||
Balance, beginning of year
|
$
|
190
|
|
$
|
113
|
|
Return on plan assets
|
15
|
|
12
|
|
||
Foreign currency translation
|
3
|
|
(2
|
)
|
||
Purchases, sales and settlements
|
7
|
|
67
|
|
||
Balance, end of year
|
$
|
215
|
|
$
|
190
|
|
|
44
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
Funded Status
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||
Change in benefit obligation
(1)
|
|
|
|
|
||||||||
Balance, beginning of year
|
$
|
3,215
|
|
$
|
3,037
|
|
$
|
665
|
|
$
|
676
|
|
Service costs
|
84
|
|
76
|
|
31
|
|
27
|
|
||||
Employee contributions
|
16
|
|
16
|
|
2
|
|
2
|
|
||||
Interest costs
|
114
|
|
115
|
|
23
|
|
25
|
|
||||
Benefits paid
|
(145
|
)
|
(133
|
)
|
(26
|
)
|
(22
|
)
|
||||
Actuarial losses (gains)
|
(217
|
)
|
217
|
|
(69
|
)
|
(14
|
)
|
||||
Past service credits/plan amendments
|
(1
|
)
|
—
|
|
(3
|
)
|
(3
|
)
|
||||
Foreign currency translation
|
141
|
|
(113
|
)
|
32
|
|
(26
|
)
|
||||
Balance, end of year
(2)
|
$
|
3,207
|
|
$
|
3,215
|
|
$
|
655
|
|
$
|
665
|
|
|
|
|
|
|
||||||||
Change in value of plan assets
|
|
|
|
|
||||||||
Balance, beginning of year
|
$
|
2,841
|
|
$
|
2,646
|
|
$
|
277
|
|
$
|
252
|
|
Actual return on plan assets
|
(93
|
)
|
336
|
|
(13
|
)
|
37
|
|
||||
Benefits paid
|
(137
|
)
|
(127
|
)
|
(26
|
)
|
(22
|
)
|
||||
Employee contributions
|
16
|
|
16
|
|
2
|
|
2
|
|
||||
Employer contributions
|
79
|
|
69
|
|
29
|
|
26
|
|
||||
Foreign currency translation
|
124
|
|
(99
|
)
|
24
|
|
(18
|
)
|
||||
Balance, end of year
|
$
|
2,830
|
|
$
|
2,841
|
|
$
|
293
|
|
$
|
277
|
|
|
|
|
|
|
||||||||
Funded status
|
$
|
(377
|
)
|
$
|
(374
|
)
|
$
|
(362
|
)
|
$
|
(388
|
)
|
|
|
|
|
|
||||||||
Balance sheet presentation
|
|
|
|
|
||||||||
Long-term assets (Note 11)
|
$
|
26
|
|
$
|
31
|
|
$
|
1
|
|
$
|
3
|
|
Current liabilities (Note 15)
|
(12
|
)
|
(12
|
)
|
(13
|
)
|
(10
|
)
|
||||
Long-term liabilities (Note 18)
|
(391
|
)
|
(393
|
)
|
(350
|
)
|
(381
|
)
|
||||
|
$
|
(377
|
)
|
$
|
(374
|
)
|
$
|
(362
|
)
|
$
|
(388
|
)
|
(1)
|
Amounts reflect projected benefit obligation for defined benefit pension plans and accumulated benefit obligation for OPEB plans.
|
(2)
|
The accumulated benefit obligation for defined benefit pension plans, excluding assumptions about future salary levels, was
$2,936 million
as at
December 31, 2018
(
December 31, 2017
-
$2,940 million
).
|
Net Benefit Cost
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||
Service costs
|
$
|
84
|
|
$
|
76
|
|
$
|
31
|
|
$
|
27
|
|
Interest costs
|
114
|
|
115
|
|
23
|
|
25
|
|
||||
Expected return on plan assets
|
(162
|
)
|
(151
|
)
|
(16
|
)
|
(14
|
)
|
||||
Amortization of actuarial losses
|
48
|
|
45
|
|
—
|
|
2
|
|
||||
Amortization of past service credits/plan amendments
|
—
|
|
—
|
|
(10
|
)
|
(12
|
)
|
||||
Regulatory adjustments
|
(1
|
)
|
2
|
|
6
|
|
4
|
|
||||
Net benefit cost
|
$
|
83
|
|
$
|
87
|
|
$
|
34
|
|
$
|
32
|
|
|
45
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
Defined Benefit
Pension Plans
|
OPEB Plans
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||
Unamortized net actuarial losses (gains)
|
$
|
19
|
|
$
|
22
|
|
$
|
(2
|
)
|
$
|
—
|
|
Unamortized past service costs
|
1
|
|
1
|
|
2
|
|
3
|
|
||||
Income tax recovery
|
(3
|
)
|
(5
|
)
|
(1
|
)
|
(1
|
)
|
||||
Accumulated other comprehensive income
(Note 21)
|
$
|
17
|
|
$
|
18
|
|
$
|
(1
|
)
|
$
|
2
|
|
|
|
|
|
|
||||||||
Net actuarial losses (gains)
|
$
|
457
|
|
$
|
443
|
|
$
|
(25
|
)
|
$
|
17
|
|
Past service credits
|
(10
|
)
|
(11
|
)
|
(16
|
)
|
(23
|
)
|
||||
Other regulatory deferrals
|
15
|
|
10
|
|
27
|
|
27
|
|
||||
|
$
|
462
|
|
$
|
442
|
|
$
|
(14
|
)
|
$
|
21
|
|
|
|
|
|
|
||||||||
Regulatory assets (Note 9)
|
$
|
462
|
|
$
|
442
|
|
$
|
23
|
|
$
|
68
|
|
Regulatory liabilities (Note 9)
|
—
|
|
—
|
|
(37
|
)
|
(47
|
)
|
||||
Net regulatory assets
|
$
|
462
|
|
$
|
442
|
|
$
|
(14
|
)
|
$
|
21
|
|
|
Defined Benefit
Pension Plans
|
OPEB Plans
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||
Current year net actuarial (gains) losses
|
$
|
(3
|
)
|
$
|
5
|
|
$
|
(2
|
)
|
$
|
(1
|
)
|
Past service (credits) costs/plan amendments
|
—
|
|
—
|
|
(1
|
)
|
2
|
|
||||
Amortization of actuarial losses
|
(1
|
)
|
(1
|
)
|
—
|
|
—
|
|
||||
Foreign currency translation
|
1
|
|
(1
|
)
|
—
|
|
—
|
|
||||
Income tax recovery
|
2
|
|
—
|
|
—
|
|
—
|
|
||||
Total recognized in comprehensive income
|
$
|
(1
|
)
|
$
|
3
|
|
$
|
(3
|
)
|
$
|
1
|
|
|
|
|
|
|
||||||||
Current year net actuarial losses (gains)
|
$
|
41
|
|
$
|
24
|
|
$
|
(39
|
)
|
$
|
(35
|
)
|
Past service credits/plan amendments
|
—
|
|
—
|
|
(3
|
)
|
(5
|
)
|
||||
Amortization of actuarial losses
|
(47
|
)
|
(44
|
)
|
—
|
|
(1
|
)
|
||||
Amortization of past service (costs) credits
|
1
|
|
—
|
|
11
|
|
12
|
|
||||
Foreign currency translation
|
21
|
|
(17
|
)
|
(3
|
)
|
2
|
|
||||
Regulatory adjustments
|
4
|
|
(1
|
)
|
(1
|
)
|
(6
|
)
|
||||
Total recognized in regulatory assets
|
$
|
20
|
|
$
|
(38
|
)
|
$
|
(35
|
)
|
$
|
(33
|
)
|
|
46
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
Significant Assumptions
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||
(weighted-average %)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Discount rate during the year
(1)
|
3.56
|
|
3.98
|
|
3.57
|
|
3.96
|
|
Discount rate as at December 31
|
4.07
|
|
3.58
|
|
4.13
|
|
3.59
|
|
Expected long-term rate of return on plan assets
(2)
|
5.80
|
|
5.97
|
|
5.48
|
|
5.81
|
|
Rate of compensation increase
|
3.35
|
|
3.34
|
|
—
|
|
—
|
|
Health care cost trend increase as at December 31
(3)
|
—
|
|
—
|
|
4.61
|
|
4.71
|
|
(1)
|
ITC and UNS use the split discount rate methodology for determining current service and interest costs. All other subsidiaries use the single discount rate approach.
|
(2)
|
Developed by management with assistance from external actuaries using best estimates of expected returns, volatilities and correlations for each class of asset. Best estimates are based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes.
|
(3)
|
The projected
2019
weighted-average health care cost trend rate for OPEB plans is
6.35%
and is assumed to decrease over the next
14 years
to the weighted-average ultimate health care cost trend rate of
4.61%
in
2032
and thereafter.
|
(in millions)
|
1% increase
|
|
1% decrease
|
|
||
Increase (decrease) in accumulated benefit obligation
|
$
|
85
|
|
$
|
(67
|
)
|
Increase (decrease) in service and interest costs
|
11
|
|
(8
|
)
|
|
Defined Benefit
|
|
|
|||
Expected Benefit Payments
|
Pension Payments
|
|
OPEB
|
|
||
(year)
|
(in millions)
|
|
(in millions)
|
|
||
2019
|
$
|
147
|
|
$
|
26
|
|
2020
|
152
|
|
28
|
|
||
2021
|
157
|
|
30
|
|
||
2022
|
165
|
|
32
|
|
||
2023
|
170
|
|
33
|
|
||
2024-2028
|
946
|
|
185
|
|
|
47
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Cash paid for
|
|
|
||||
Interest
|
$
|
969
|
|
$
|
927
|
|
Income taxes
|
73
|
|
69
|
|
||
Change in working capital
|
|
|
||||
Accounts receivable and other current assets
|
$
|
(204
|
)
|
$
|
(74
|
)
|
Prepaid expenses
|
1
|
|
(3
|
)
|
||
Inventories
|
(8
|
)
|
(6
|
)
|
||
Regulatory assets - current portion
|
16
|
|
39
|
|
||
Accounts payable and other current liabilities
|
99
|
|
119
|
|
||
Regulatory liabilities - current portion
|
(6
|
)
|
(172
|
)
|
||
|
$
|
(102
|
)
|
$
|
(97
|
)
|
Non-cash investing and financing activities
|
|
|
||||
Accrued capital expenditures
|
$
|
328
|
|
$
|
307
|
|
Common share dividends reinvested
|
272
|
|
253
|
|
||
Gila River generating station Unit 2 capital lease
|
223
|
|
—
|
|
||
Contributions in aid of construction
|
14
|
|
35
|
|
||
Exercise of stock options into common shares
|
1
|
|
5
|
|
|
48
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
49
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Level 1
(1)
|
Level 2
(1)
|
|
Level 3
(1)
|
|
Total
|
|
|||||
As at December 31, 2018
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (3)
|
$
|
—
|
|
$
|
33
|
|
$
|
8
|
|
$
|
41
|
|
Energy contracts not subject to regulatory deferral
(2)
|
—
|
|
13
|
|
3
|
|
16
|
|
||||
Other investments
(4)
|
155
|
|
—
|
|
—
|
|
155
|
|
||||
|
$
|
155
|
|
$
|
46
|
|
$
|
11
|
|
$
|
212
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(3) (5)
|
$
|
—
|
|
$
|
(86
|
)
|
$
|
(3
|
)
|
$
|
(89
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
Foreign exchange contracts, interest rate and total return swaps
(6)
|
(8
|
)
|
(1
|
)
|
—
|
|
(9
|
)
|
||||
|
$
|
(8
|
)
|
$
|
(88
|
)
|
$
|
(3
|
)
|
$
|
(99
|
)
|
As at December 31, 2017
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (3)
|
$
|
—
|
|
$
|
19
|
|
$
|
2
|
|
$
|
21
|
|
Energy contracts not subject to regulatory deferral
(2)
|
—
|
|
26
|
|
4
|
|
30
|
|
||||
Foreign exchange contracts
(6)
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Other investments
(4)
|
78
|
|
—
|
|
—
|
|
78
|
|
||||
|
$
|
81
|
|
$
|
45
|
|
$
|
6
|
|
$
|
132
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(3) (5)
|
$
|
(1
|
)
|
$
|
(103
|
)
|
$
|
(2
|
)
|
$
|
(106
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
||||
Interest rate and total return swaps
(6)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
|
$
|
(1
|
)
|
$
|
(104
|
)
|
$
|
(3
|
)
|
$
|
(108
|
)
|
(1)
|
Under the hierarchy, fair value is determined using: (i) level 1 - unadjusted quoted prices in active markets; (ii) level 2 - other pricing inputs directly or indirectly observable in the marketplace; and (iii) level 3 - unobservable inputs, used when observable inputs are not available. Classifications reflect the lowest level of input that is significant to the fair value measurement.
|
(2)
|
Included in accounts receivable and other current assets or other assets
|
(3)
|
Unrealized gains and losses arising from changes in fair value of these contracts are deferred as a regulatory asset or liability for recovery from, or refund to, customers in future rates as permitted by the regulators, with the exception of long-term wholesale trading contracts and certain gas swap contracts.
|
(4)
|
Included in other assets
|
(5)
|
Included in accounts payable and other current liabilities or other liabilities
|
(6)
|
Included in accounts receivable and other current assets, accounts payable and other current liabilities or other liabilities
|
|
50
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Balance, beginning of year
|
$
|
3
|
|
$
|
2
|
|
Realized gains (losses)
|
14
|
|
(13
|
)
|
||
Settlements
|
(9
|
)
|
12
|
|
||
Transfers of assets out of level 3
|
—
|
|
(2
|
)
|
||
Transfers of liabilities out of level 3
|
—
|
|
4
|
|
||
Balance, end of year
|
$
|
8
|
|
$
|
3
|
|
Energy Contracts
(in millions) |
Gross Amount Recognized on Balance Sheet
|
|
Counterparty Netting of Energy Contracts
|
|
Cash Collateral Received/Posted
|
|
Net Amount
|
|
||||
As at December 31, 2018
|
|
|
|
|
||||||||
Derivative assets
|
$
|
57
|
|
$
|
28
|
|
$
|
16
|
|
$
|
13
|
|
Derivative liabilities
|
(90
|
)
|
(28
|
)
|
—
|
|
(62
|
)
|
As at December 31, 2017
|
|
|
|
|
||||||||
Derivative assets
|
$
|
51
|
|
$
|
17
|
|
$
|
7
|
|
$
|
27
|
|
Derivative liabilities
|
(107
|
)
|
(17
|
)
|
—
|
|
(90
|
)
|
As at December 31
|
2018
|
|
2017
|
|
Energy contracts subject to regulatory deferral
(1)
|
|
|
||
Electricity swap contracts
(GWh)
|
774
|
|
1,291
|
|
Electricity power purchase contracts
(GWh)
|
651
|
|
761
|
|
Gas swap contracts
(PJ)
|
203
|
|
216
|
|
Gas supply contract premiums
(PJ)
|
266
|
|
219
|
|
Energy contracts not subject to regulatory deferral
(1)
|
|
|
||
Wholesale trading contracts
(GWh)
|
1,440
|
|
2,387
|
|
Gas swap contracts
(PJ)
|
37
|
|
36
|
|
(1)
|
GWh means gigawatt hours and PJ means petajoules.
|
|
51
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
52
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
2018
|
|
2017
|
|
||
Assets
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
15
|
|
$
|
16
|
|
Accounts receivable and other current assets
|
15
|
|
14
|
|
||
PPE
|
674
|
|
688
|
|
||
Intangible assets
|
30
|
|
30
|
|
||
|
$
|
734
|
|
$
|
748
|
|
Liabilities
|
|
|
|
|
||
Accounts payable and other current liabilities
|
$
|
(6
|
)
|
$
|
(28
|
)
|
Other liabilities
|
(67
|
)
|
(63
|
)
|
||
|
(73
|
)
|
(91
|
)
|
||
Net assets before partners' equity
|
$
|
661
|
|
$
|
657
|
|
|
|
|
||||
Revenue
|
$
|
94
|
|
$
|
93
|
|
Expenses
|
|
|
||||
Operating expenses
|
18
|
|
17
|
|
||
Depreciation and amortization
|
18
|
|
18
|
|
||
Finance charges
|
4
|
|
4
|
|
||
|
40
|
|
39
|
|
||
Net earnings
|
$
|
54
|
|
$
|
54
|
|
|
53
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(in millions)
|
Total
|
|
Due within 1 year
|
|
Due in year 2
|
|
Due in year 3
|
|
Due in year 4
|
|
Due in year 5
|
|
Due after
5 years |
|
|||||||
Interest obligations on long-term debt
|
$
|
16,345
|
|
$
|
994
|
|
$
|
973
|
|
$
|
950
|
|
$
|
902
|
|
$
|
870
|
|
$
|
11,656
|
|
Power purchase obligations
(1)
|
2,438
|
|
254
|
|
191
|
|
174
|
|
170
|
|
172
|
|
1,477
|
|
|||||||
Renewable power purchase obligations
(2)
|
1,699
|
|
110
|
|
110
|
|
109
|
|
109
|
|
108
|
|
1,153
|
|
|||||||
Gas purchase obligations
(3)
|
1,348
|
|
359
|
|
290
|
|
242
|
|
202
|
|
144
|
|
111
|
|
|||||||
Long-term contracts - UNS Energy
(4)
|
777
|
|
176
|
|
142
|
|
92
|
|
60
|
|
46
|
|
261
|
|
|||||||
ITC easement agreement
(5)
|
436
|
|
14
|
|
14
|
|
14
|
|
14
|
|
14
|
|
366
|
|
|||||||
Renewable energy credit purchase agreements
(6)
|
146
|
|
24
|
|
26
|
|
18
|
|
11
|
|
11
|
|
56
|
|
|||||||
Debt collection agreement
(7)
|
119
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
104
|
|
|||||||
Purchase of Springerville Common Facilities
(8)
|
93
|
|
—
|
|
—
|
|
93
|
|
—
|
|
—
|
|
—
|
|
|||||||
Joint-use asset and shared service agreements
|
52
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
37
|
|
|||||||
Operating lease obligations
|
51
|
|
8
|
|
6
|
|
5
|
|
4
|
|
4
|
|
24
|
|
|||||||
Other
(9)
|
530
|
|
108
|
|
84
|
|
89
|
|
38
|
|
36
|
|
175
|
|
|||||||
Total
|
$
|
24,034
|
|
$
|
2,053
|
|
$
|
1,842
|
|
$
|
1,792
|
|
$
|
1,516
|
|
$
|
1,411
|
|
$
|
15,420
|
|
(1)
|
The most significant power purchase obligations are described below.
|
(2)
|
TEP and UNS Electric are party to renewable PPAs, with expiry dates from 2027 through 2043, that require them to purchase
100%
of the output of certain renewable energy generating facilities once commercial operation is achieved. Amounts shown are the estimated future payments.
|
(3)
|
Certain of the Corporation's subsidiaries, mainly FortisBC Energy, enter into contracts for the purchase of gas, gas transportation and storage services. FortisBC Energy's gas purchase obligations are based on gas commodity indices that vary with market prices and the obligations are based on index prices as at
December 31, 2018
.
|
(4)
|
UNS Energy enters into long-term contracts for the purchase and delivery of coal to fuel generating facilities, the purchase of gas transportation services to meet load requirements, and the purchase of transmission services for purchased power. Amounts paid for coal depend on actual quantities purchased and delivered. Certain contracts have price adjustment clauses that will affect future costs. These contracts have various expiry dates between 2019 and 2040.
|
|
54
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
(5)
|
ITC is party to an agreement with Consumers Energy, the primary customer of METC, which provides METC with an easement for transmission purposes and rights-of-way, leasehold interests, fee interests and licences associated with the land over which its transmission lines cross. The agreement expires in December 2050, subject to
10
potential
50
-year renewals thereafter.
|
(6)
|
UNS Energy and Central Hudson are party to renewable energy credit purchase agreements, mainly for the purchase of environmental attributions from retail customers with solar installations or other renewable generators. Payments are primarily made at contractually agreed-upon intervals based on metered energy production.
|
(7)
|
Maritime Electric is party to a debt collection agreement with PEI Energy Corporation for the initial capital cost of the submarine cables and associated parts of the New Brunswick transmission system interconnection. Payments under the agreement, which expires in February 2056, will be collected from customers in future rates.
|
(8)
|
UNS Energy is obligated to purchase an undivided
32.2%
interest in the Springerville Common Facilities if the related
two
leases are not renewed. The initial lease terms expire in January 2021
(Note 17)
.
|
(9)
|
Includes stock-based compensation plan obligations, land easements, asset retirement obligations, and defined benefit pension plan funding obligations.
|
|
55
|
|
FORTIS INC.
Notes to Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
|
|
56
|
|
|
CONTENTS
|
|||
Forward-Looking Information
|
Contractual Obligations
|
||
Corporate Overview
|
Capital Structure
|
||
Corporate Strategy
|
Credit Ratings
|
||
Key Trends, Risks and Opportunities
|
Capital Expenditure Program
|
||
Summary Financial Highlights
|
Additional Investment Opportunities
|
||
Consolidated Results of Operations
|
Cash Flow Requirements
|
||
Segmented Results of Operations
|
Credit Facilities
|
||
Regulated Utilities
|
Off-Balance Sheet Arrangements
|
||
ITC
|
Business Risk Management
|
||
UNS Energy
|
Changes in Accounting Policies
|
||
Central Hudson
|
Future Accounting Pronouncements
|
||
FortisBC Energy
|
Financial Instruments
|
||
FortisAlberta
|
Critical Accounting Estimates
|
||
FortisBC Electric
|
Related-Party and Inter-Company Transactions
|
||
Other Electric
|
Selected Annual Financial Information
|
||
Non-Regulated
|
Fourth Quarter Results
|
||
Energy Infrastructure
|
Summary of Quarterly Results
|
||
Corporate and Other
|
Management's Evaluation of Disclosure Controls and Procedures and Internal Controls over Financial Reporting
|
||
Regulatory Highlights
|
|||
Consolidated Financial Position
|
|||
Liquidity and Capital Resources
|
Outlook
|
||
Summary of Consolidated Cash Flows
|
Outstanding Share Data
|
||
|
|
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
1
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
2
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
3
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
4
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
5
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
6
|
December 31, 2018
|
|
For the Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Net Earnings Attributable to Common Equity Shareholders
($ millions)
|
1,100
|
|
963
|
|
137
|
|
Basic Earnings per Common Share
($)
|
2.59
|
|
2.32
|
|
0.27
|
|
Adjusted Basic Earnings per Common Share
($)
(1)
|
2.51
|
|
2.47
|
|
0.04
|
|
Weighted Average Number of Common Shares Outstanding
(millions)
|
424.7
|
|
415.5
|
|
9.2
|
|
Cash Flow from Operating Activities
($ billions)
|
2.6
|
|
2.8
|
|
(0.2
|
)
|
Dividends Paid per Common Share
($)
|
1.725
|
|
1.625
|
|
0.10
|
|
Total Assets
($ billions)
|
53.1
|
|
47.8
|
|
5.3
|
|
Capital Expenditures
($ billions)
|
3.2
|
|
3.0
|
|
0.2
|
|
Long-Term Debt Offerings
($ billions)
|
1.6
|
|
2.5
|
|
(0.9
|
)
|
(1)
|
Adjusted basic earnings per common share is a non-US GAAP measure. For a definition and reconciliation of this non-US GAAP measure, refer to the "Consolidated Results of Operations" section of this MD&A.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
7
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
8
|
December 31, 2018
|
|
Years Ended December 31
|
|
|
|
|||
($ millions)
|
2018
|
|
2017
|
|
Variance
|
|
Revenue
|
8,390
|
|
8,301
|
|
89
|
|
Energy Supply Costs
|
2,495
|
|
2,361
|
|
134
|
|
Operating Expenses
|
2,287
|
|
2,250
|
|
37
|
|
Depreciation and Amortization
|
1,243
|
|
1,179
|
|
64
|
|
Other Income, Net
|
60
|
|
116
|
|
(56
|
)
|
Finance Charges
|
974
|
|
914
|
|
60
|
|
Income Tax Expense
|
165
|
|
588
|
|
(423
|
)
|
Net Earnings
|
1,286
|
|
1,125
|
|
161
|
|
Net Earnings Attributable to:
|
|
|
|
|||
Non-Controlling Interests
|
120
|
|
97
|
|
23
|
|
Preference Equity Shareholders
|
66
|
|
65
|
|
1
|
|
Common Equity Shareholders
|
1,100
|
|
963
|
|
137
|
|
Net Earnings
|
1,286
|
|
1,125
|
|
161
|
|
Basic Earnings per Common Share
|
2.59
|
|
2.32
|
|
0.27
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
9
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
10
|
December 31, 2018
|
|
Non-US GAAP Reconciliation
|
|
|
|
|||
Years Ended December 31
|
|
|
|
|||
($ millions, except for common share data)
|
2018
|
|
2017
|
|
Variance
|
|
Net Earnings Attributable to Common Equity Shareholders
|
1,100
|
|
963
|
|
137
|
|
Adjusting Items:
|
|
|
|
|
|
|
U.S. tax reform
(1)
|
—
|
|
146
|
|
(146
|
)
|
Unrealized loss (gain) on mark-to-market of derivatives
(2)
|
10
|
|
(26
|
)
|
36
|
|
Consolidated state income tax election
(3)
|
(30
|
)
|
—
|
|
(30
|
)
|
Assets held for sale
(3)
|
(14
|
)
|
—
|
|
(14
|
)
|
Acquisition break fee
(4)
|
—
|
|
(24
|
)
|
24
|
|
Unrealized foreign exchange gain
(5)
|
—
|
|
(21
|
)
|
21
|
|
FERC-ordered transmission refunds
(6)
|
—
|
|
(11
|
)
|
11
|
|
Adjusted Net Earnings Attributable to Common Equity Shareholders
|
1,066
|
|
1,027
|
|
39
|
|
Adjusted Basic Earnings per Common Share
($)
|
2.51
|
|
2.47
|
|
0.04
|
|
Weighted Average Number of Common Shares Outstanding
(millions)
|
424.7
|
|
415.5
|
|
9.2
|
|
(1)
|
One-time remeasurement of deferred income tax assets and liabilities resulting from U.S. tax reform (ITC - $
91 million
, UNS Energy -
$5 million
, Central Hudson -
$2 million
, and Corporate and Other -
$48 million
)
|
(2)
|
Represents timing differences related to the accounting of natural gas derivatives at Aitken Creek, included in the Energy Infrastructure segment
|
(3)
|
Remeasurement of deferred income tax liabilities, included in the Corporate and Other segment
|
(4)
|
Related to a terminated acquisition, included in the Corporate and Other segment
|
(5)
|
One-time foreign exchange gain on an affiliate loan, included in the Corporate and Other segment
|
(6)
|
Favourable settlement of matters at UNS Energy related to prior period FERC filings
|
Segmented Net Earnings Attributable to Common Equity Shareholders
|
||||||
Years Ended December 31
|
|
|||||
($ millions)
|
2018
|
|
2017
|
|
Variance
|
|
Regulated Utilities
|
|
|
|
|||
ITC
|
361
|
|
272
|
|
89
|
|
UNS Energy
|
293
|
|
270
|
|
23
|
|
Central Hudson
|
74
|
|
70
|
|
4
|
|
FortisBC Energy
|
155
|
|
154
|
|
1
|
|
FortisAlberta
|
120
|
|
120
|
|
—
|
|
FortisBC Electric
|
56
|
|
55
|
|
1
|
|
Other Electric
|
105
|
|
98
|
|
7
|
|
Non-Regulated
|
|
|
|
|||
Energy Infrastructure
|
72
|
|
94
|
|
(22
|
)
|
Corporate and Other
|
(136
|
)
|
(170
|
)
|
34
|
|
Net Earnings Attributable to Common Equity Shareholders
|
1,100
|
|
963
|
|
137
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
11
|
December 31, 2018
|
|
Financial Highlights
(1)
|
|
|
|
|
|||
Years Ended December 31
|
2018
|
|
|
2017
|
|
Variance
|
|
Average US:CAD Exchange Rate
(2)
|
1.30
|
|
|
1.30
|
|
—
|
|
Revenue
($ millions)
|
1,504
|
|
|
1,575
|
|
(71
|
)
|
Earnings
($ millions)
|
361
|
|
|
272
|
|
89
|
|
(1)
|
Revenue represents 100% of ITC, while earnings represent the Corporation's 80.1% controlling ownership interest in ITC and reflects consolidated purchase price accounting adjustments.
|
(2)
|
The reporting currency of ITC is the US dollar.
|
Financial Highlights
|
|
|
|
|
|||
Years Ended December 31
|
2018
|
|
|
2017
|
|
Variance
|
|
Average US:CAD Exchange Rate
(1)
|
1.30
|
|
|
1.30
|
|
—
|
|
Electricity Sales
(gigawatt hours ("GWh"))
|
17,406
|
|
|
14,971
|
|
2,435
|
|
Gas Volumes
(petajoules ("PJ"))
|
13
|
|
|
13
|
|
—
|
|
Revenue
($ millions)
|
2,202
|
|
|
2,080
|
|
122
|
|
Earnings
($ millions)
|
293
|
|
|
270
|
|
23
|
|
(1)
|
The reporting currency of UNS Energy is the US dollar.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
12
|
December 31, 2018
|
|
Financial Highlights
|
|
|
|
|
|||
Years Ended December 31
|
2018
|
|
|
2017
|
|
Variance
|
|
Average US:CAD Exchange Rate
(1)
|
1.30
|
|
|
1.30
|
|
—
|
|
Electricity Sales
(GWh)
|
5,118
|
|
|
4,891
|
|
227
|
|
Gas Volumes
(PJ)
|
24
|
|
|
22
|
|
2
|
|
Revenue
($ millions)
|
924
|
|
|
872
|
|
52
|
|
Earnings
($ millions)
|
74
|
|
|
70
|
|
4
|
|
(1)
|
The reporting currency of Central Hudson is the US dollar.
|
Financial Highlights
|
|
|
|
|||
Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Gas Volumes
(PJ)
|
212
|
|
221
|
|
(9
|
)
|
Revenue
($ millions)
|
1,187
|
|
1,198
|
|
(11
|
)
|
Earnings
($ millions)
|
155
|
|
154
|
|
1
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
13
|
December 31, 2018
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Energy Deliveries
(GWh)
|
17,154
|
|
17,018
|
|
136
|
|
Revenue
($ millions)
|
579
|
|
600
|
|
(21
|
)
|
Earnings
($ millions)
|
120
|
|
120
|
|
—
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Electricity Sales
(GWh)
|
3,250
|
|
3,305
|
|
(55
|
)
|
Revenue
($ millions)
|
408
|
|
398
|
|
10
|
|
Earnings
($ millions)
|
56
|
|
55
|
|
1
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
14
|
December 31, 2018
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Average USD:CAD Exchange Rate
(1)
|
1.30
|
|
1.30
|
|
—
|
|
Electricity Sales
(GWh)
|
9,292
|
|
9,196
|
|
96
|
|
Revenue
($ millions)
|
1,412
|
|
1,363
|
|
49
|
|
Earnings
($ millions)
|
105
|
|
98
|
|
7
|
|
(1)
|
The reporting currency of Caribbean Utilities and FortisTCI is the US dollar. The reporting currency of BEL is the Belizean dollar, which is pegged to the US dollar at BZ$2.00=US$1.00.
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Energy Sales
(GWh)
|
853
|
|
889
|
|
(36
|
)
|
Revenue
($ millions)
|
184
|
|
226
|
|
(42
|
)
|
Earnings
($ millions)
|
72
|
|
94
|
|
(22
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
15
|
December 31, 2018
|
|
Financial Highlights
|
|
|
|
|||
Years Ended December 31
|
|
|||||
($ millions)
|
2018
|
|
2017
|
|
Variance
|
|
Net Loss
|
(136
|
)
|
(170
|
)
|
34
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
16
|
December 31, 2018
|
|
Regulated Utility
|
Application/Proceeding
|
TEP
|
Targeted Rate Case Filing
|
FBC Energy and FBC Electric
|
Targeted 2020-2024 Multi-Year Rate Plan Filing
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
17
|
December 31, 2018
|
|
Significant Changes in the Consolidated Balance Sheets between December 31, 2018 and December 31, 2017
|
||
Balance Sheet Account
|
Increase
($ millions)
(1)
|
Explanation
|
Accounts receivable and other current assets
|
226
|
The increase was mainly due to higher income tax receivable, higher wholesale sales at UNS Energy and foreign exchange.
|
Assets held for sale
|
766
|
The increase was due to a reclassification, primarily from property, plant and equipment, of the assets associated with the expected sale of the Corporation's 51% interest in the Waneta Expansion.
|
Regulatory assets (including current and long-term)
|
133
|
The increase was primarily due to foreign exchange and higher deferred income taxes at FortisAlberta, partially offset by the regulator-ordered netting of certain regulatory liabilities at Central Hudson.
|
Property, plant and equipment, net
|
2,986
|
The increase was mainly due to capital expenditures, foreign exchange and the recognition of a capital lease for Gila River generating station Unit 2 at UNS Energy. The increase was partially offset by depreciation and the reclassification of assets held for sale.
|
Intangible assets, net
|
119
|
The increase was primarily due to foreign exchange and ITC expenditures related to land rights and software.
|
Goodwill
|
886
|
The increase was due to foreign exchange.
|
Accounts payable and other current liabilities
|
236
|
The increase was mainly due to higher amounts owing for energy supply costs and foreign exchange, partially offset by the timing of transmission cost payments at FortisAlberta.
|
Regulatory liabilities (including current and long-term)
|
180
|
The increase was primarily due to foreign exchange, partially offset by lower rate stabilization accounts at FortisBC Energy.
|
Deferred income tax liabilities
|
388
|
The increase was mainly due to timing differences related to capital expenditures at the regulated utilities, foreign exchange and the utilization of taxable losses.
|
Long-term debt (including current portion and short-term borrowings)
|
2,540
|
The increase was due to debt issuances at the regulated utilities, foreign exchange and higher net borrowings under committed credit facilities, partially offset by scheduled debt repayments.
|
Capital lease and finance obligations (including current portion)
|
181
|
The increase was mainly due to UNS Energy's recognition of a capital lease for Gila River generating station Unit 2.
|
Shareholders' equity
|
1,530
|
The increase was due to: (i) accumulated other comprehensive income associated with the translation of the Corporation's US dollar-denominated investments in subsidiaries, net of hedging activities and tax; (ii) net earnings attributable to common shareholders for 2018, less dividends declared on common shares; and (iii) the issuance of common shares under the Corporation's dividend reinvestment plan.
|
Non-controlling interests
|
177
|
The increase was due to net earnings and comprehensive income attributable to minority interests.
|
(1)
|
Includes the impact of foreign exchange based upon the closing foreign exchange rate at
December 31, 2018
of US$1.00=CAD$
1.36
compared to the closing foreign exchange rate at
December 31, 2017
of US$1.00=CAD$
1.25
.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
18
|
December 31, 2018
|
|
Summary of Consolidated Cash Flows
|
|
|
|
|||
Years ended December 31
|
|
|
|
|||
($ millions)
|
2018
|
|
2017
|
|
Variance
|
|
Cash, Beginning of Year
|
327
|
|
269
|
|
58
|
|
Cash Provided by (Used in):
|
|
|
|
|||
Operating Activities
|
2,604
|
|
2,756
|
|
(152
|
)
|
Investing Activities
|
(3,252
|
)
|
(3,025
|
)
|
(227
|
)
|
Financing Activities
|
644
|
|
339
|
|
305
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
24
|
|
(12
|
)
|
36
|
|
Cash Associated with Assets Held for Sale
|
(15
|
)
|
—
|
|
(15
|
)
|
Cash, End of Year
|
332
|
|
327
|
|
5
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
19
|
December 31, 2018
|
|
(1)
|
Refer to
Note 16
of the 2018 Annual Financial Statements for issue date, form of instrument, interest rate, term and use of proceeds.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
20
|
December 31, 2018
|
|
Contractual Obligations
|
|
Due
within
1 year
|
|
Due in
year 2
|
|
Due in
year 3
|
|
Due in
year 4
|
|
Due in year 5
|
|
Due
after
5 years
|
|
|
As at December 31, 2018
|
|
|||||||||||||
($ millions)
|
Total
|
|
||||||||||||
Long-term debt
|
24,231
|
|
926
|
|
731
|
|
1,324
|
|
1,125
|
|
1,605
|
|
18,520
|
|
Interest obligations on long-term debt
|
16,345
|
|
994
|
|
973
|
|
950
|
|
902
|
|
870
|
|
11,656
|
|
Capital lease and finance obligations
(1)
|
2,451
|
|
313
|
|
77
|
|
80
|
|
49
|
|
47
|
|
1,885
|
|
Power purchase obligations
(2)
|
2,438
|
|
254
|
|
191
|
|
174
|
|
170
|
|
172
|
|
1,477
|
|
Renewable power purchase obligations
(3)
|
1,699
|
|
110
|
|
110
|
|
109
|
|
109
|
|
108
|
|
1,153
|
|
Gas purchase obligations
(4)
|
1,348
|
|
359
|
|
290
|
|
242
|
|
202
|
|
144
|
|
111
|
|
Long-term contracts - UNS Energy
(5)
|
777
|
|
176
|
|
142
|
|
92
|
|
60
|
|
46
|
|
261
|
|
ITC easement agreement
(6)
|
436
|
|
14
|
|
14
|
|
14
|
|
14
|
|
14
|
|
366
|
|
Renewable energy credit purchase agreements
(7)
|
146
|
|
24
|
|
26
|
|
18
|
|
11
|
|
11
|
|
56
|
|
Debt collection agreement
(8)
|
119
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
104
|
|
Purchase of Springerville Common Facilities
(9)
|
93
|
|
—
|
|
—
|
|
93
|
|
—
|
|
—
|
|
—
|
|
Waneta Partnership promissory note
|
72
|
|
72
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Joint-use asset and shared service agreements
|
52
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
37
|
|
Operating lease obligations
|
51
|
|
8
|
|
6
|
|
5
|
|
4
|
|
4
|
|
24
|
|
Other
(10)
|
530
|
|
108
|
|
84
|
|
89
|
|
38
|
|
36
|
|
175
|
|
Total
|
50,788
|
|
3,364
|
|
2,650
|
|
3,196
|
|
2,690
|
|
3,063
|
|
35,825
|
|
(1)
|
Includes principal payments, imputed interest and executory costs.
|
(2)
|
The most significant power purchase obligations are described below.
|
(3)
|
TEP and UNS Electric are party to renewable PPAs, with expiry dates from 2027 through 2043, that require them to purchase
100%
of the output of certain renewable energy generating facilities once commercial operation is achieved. Amounts shown are the estimated future payments.
|
(4)
|
Certain of the Corporation's subsidiaries, mainly FortisBC Energy, enter into contracts for the purchase of gas, gas transportation and storage services. FortisBC Energy's gas purchase obligations are based on gas commodity indices that vary with market prices and the obligations are based on index prices as at
December 31, 2018
.
|
(5)
|
UNS Energy enters into long-term contracts for the purchase and delivery of coal to fuel generating facilities, the purchase of gas transportation services to meet load requirements, and the purchase of transmission services for purchased power. Amounts paid for coal depend on actual quantities purchased and delivered. Certain contracts have price adjustment clauses that will affect future costs. These contracts have various expiry dates between 2019 and 2040.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
21
|
December 31, 2018
|
|
(6)
|
ITC is party to an agreement with Consumers Energy, the primary customer of METC, which provides METC with an easement for transmission purposes and rights-of-way, leasehold interests, fee interests and licences associated with the land over which its transmission lines cross. The agreement expires in December 2050, subject to
10
potential
50
-year renewals thereafter.
|
(7)
|
UNS Energy and Central Hudson are party to renewable energy credit purchase agreements, mainly for the purchase of environmental attributions from retail customers with solar installations or other renewable generators. Payments are primarily made at contractually agreed-upon intervals based on metered energy production.
|
(8)
|
Maritime Electric is party to a debt collection agreement with PEI Energy Corporation for the initial capital cost of the submarine cables and associated parts of the New Brunswick transmission system interconnection. Payments under the agreement, which expires in February 2056, will be collected from customers in future rates.
|
(9)
|
UNS Energy is obligated to purchase an undivided
32.2%
interest in the Springerville Common Facilities if the related two leases are not renewed. The initial lease terms expire in January 2021.
|
(10)
|
Includes stock-based compensation plan obligations, land easements, asset retirement obligations, and defined benefit pension plan funding obligations.
|
Capital Structure
|
|
|
||
As at December 31
|
|
|
||
(%)
|
2018
|
|
2017
|
|
Debt
(1)
|
57.0
|
|
56.5
|
|
Preference shares
|
3.8
|
|
4.2
|
|
Common shareholders' equity and minority interest
|
39.2
|
|
39.3
|
|
Total
|
100.0
|
|
100.0
|
|
(1)
|
Includes long-term debt and capital lease and finance obligations, including current portion, and short-term borrowings, net of cash
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
22
|
December 31, 2018
|
|
Rating Agency
|
Credit Rating
|
Type of Rating
|
Outlook
|
Standard & Poor's ("S&P")
|
A-
|
Corporate
|
Negative
|
|
BBB+
|
Unsecured debt
|
|
DBRS
|
BBB (high)
|
Corporate
|
Stable
|
|
BBB (high)
|
Unsecured debt
|
|
Moody's Investor Service
|
Baa3
|
Issuer
|
Stable
|
|
Baa3
|
Unsecured debt
|
|
Consolidated Capital Expenditures
(1)
|
||||||||||||||||||||
Year Ended December 31, 2018
|
||||||||||||||||||||
|
|
Regulated Utilities
|
|
|
|
|||||||||||||||
($ millions)
|
ITC
|
UNS
Energy
|
Central
Hudson
|
FortisBC
Energy
|
Fortis
Alberta
|
FortisBC
Electric
|
Other Electric
|
Total
Regulated
Utilities
|
Non-Regulated
(2)
|
Total
|
||||||||||
Generation
|
—
|
|
182
|
|
1
|
|
—
|
|
—
|
|
26
|
|
64
|
|
273
|
|
30
|
|
303
|
|
Transmission
|
916
|
|
58
|
|
32
|
|
230
|
|
—
|
|
17
|
|
41
|
|
1,294
|
|
—
|
|
1,294
|
|
Distribution
|
—
|
|
235
|
|
157
|
|
183
|
|
370
|
|
46
|
|
160
|
|
1,151
|
|
—
|
|
1,151
|
|
Other
(3)
|
82
|
|
124
|
|
55
|
|
73
|
|
63
|
|
17
|
|
35
|
|
449
|
|
21
|
|
470
|
|
Total
|
998
|
|
599
|
|
245
|
|
486
|
|
433
|
|
106
|
|
300
|
|
3,167
|
|
51
|
|
3,218
|
|
(1)
|
Represents cash payments to construct property, plant and equipment and intangible assets, as reflected on the consolidated statement of cash flows
|
(2)
|
Includes Energy Infrastructure and Corporate and Other segments
|
(3)
|
Includes facilities, equipment, vehicles, information technology and other, along with capital expenditures associated with Alberta Electric System Operator ("AESO") transmission-related capital expenditures at FortisAlberta
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
23
|
December 31, 2018
|
|
(1)
|
Represents forecast cash payments to construct property, plant and equipment and intangible assets, as would be reflected on the consolidated statement of cash flows, as well as Fortis' assumed share of estimated capital spending for the Wataynikaneyap Transmission Power Project. Forecast capital expenditures for
2019
are based on a forecast exchange rate of US$1.00=CAD$1.28. Based on the closing foreign exchange rate on
December 31, 2018
of US$1.00=CAD$
1.36
, forecast capital expenditures for
2019
would be approximately $3.9 billion.
|
(2)
|
Includes Energy Infrastructure and Corporate and Other segments
|
(3)
|
Includes facilities, equipment, vehicles, information technology and other, along with forecast capital expenditures associated with AESO transmission-related investment at FortisAlberta
|
(1)
|
Capital expenditures to connect new customers and infrastructure upgrades required to meet customer and associated load growth, including capital expenditures associated with AESO transmission‑related investment at FortisAlberta
|
(2)
|
Capital expenditures required to ensure continued and enhanced performance, reliability and safety of generation, transmission and distribution assets
|
(3)
|
Relates to facilities, equipment, vehicles, information technology systems and other assets
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
24
|
December 31, 2018
|
|
(1)
|
Actual midyear rate base for
2018
is based on the actual average exchange rate of US$1.00=CAD$1.30 and forecast midyear rate base for
2019
is based on a forecast exchange rate of US$1.00=CAD$1.28. Based on the closing foreign exchange rate on
December 31, 2018
of US$1.00=CAD$
1.36
, forecast midyear rate base for
2019
would be approximately $29 billion.
|
Significant Capital Projects
(1)
|
|
|
|
Forecast
|
|
Expected
|
||||
($ millions)
|
|
Pre-
|
|
Actual
|
|
Forecast
|
|
2020 -
|
|
Year of
|
Company
|
Nature of Project
|
2018
|
|
2018
|
|
2019
|
|
2023
|
|
Completion
|
ITC
(2) (3)
|
Multi-Value Regional Transmission Projects ("MVPs")
|
370
|
|
211
|
|
88
|
|
244
|
|
2023
|
|
34.5 to 69 kilovolt ("kV") Transmission Conversion Project
|
86
|
|
139
|
|
87
|
|
261
|
|
Post-2023
|
UNS Energy
(3)
|
Gila River Natural Gas Generating Station Unit 2
|
—
|
|
—
|
|
211
|
|
—
|
|
2019
|
|
Southline Transmission Project
|
—
|
|
—
|
|
182
|
|
207
|
|
2022
|
|
New Mexico Wind Project
|
—
|
|
—
|
|
55
|
|
222
|
|
2020
|
FortisBC Energy
|
Lower Mainland Intermediate Pressure System Upgrade ("LMIPSU")
|
43
|
|
165
|
|
187
|
|
65
|
|
2020
|
|
Eagle Mountain Woodfibre Gas Line Project
(4)
|
—
|
|
—
|
|
—
|
|
350
|
|
2023
|
|
Transmission Integrity Management Capabilities Project
|
—
|
|
—
|
|
—
|
|
568
|
|
Post-2023
|
|
Inland Gas Upgrades Project
|
—
|
|
3
|
|
14
|
|
208
|
|
Post-2023
|
Wataynikaneyap
|
Transmission Power Project
(5)
|
—
|
|
25
|
|
158
|
|
429
|
|
2023
|
(1)
|
Represents property, plant and equipment and intangible asset expenditures, including both the capitalized debt and equity components of AFUDC, where applicable. Significant capital projects are identified as those with a total project cost of $150 million or greater and exclude ongoing capital maintenance projects.
|
(2)
|
Capital expenditures prior to 2018 are from the date of acquisition of October 14, 2016.
|
(3)
|
Forecast capital expenditures are based on a forecast exchange rate of US$1.00=CAD$1.28 for
2019
through
2023
.
|
(4)
|
Net of forecast customer contributions
|
(5)
|
Fortis' assumed share of estimated capital spending, including deferred development costs. Under the funding framework, Fortis will be funding its equity component only.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
25
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
26
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
27
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
28
|
December 31, 2018
|
|
Credit Facilities
|
|
|
|
|
||||
As at December 31
($ millions)
|
Regulated
Utilities
|
|
Corporate
and Other
|
|
2018
|
|
2017
|
|
Total credit facilities
|
3,780
|
|
1,385
|
|
5,165
|
|
4,952
|
|
Credit facilities utilized:
|
|
|
|
|
||||
Short-term borrowings
|
(60
|
)
|
—
|
|
(60
|
)
|
(209
|
)
|
Long-term debt (including current portion)
(1)
|
(731
|
)
|
(335
|
)
|
(1,066
|
)
|
(671
|
)
|
Letters of credit outstanding
|
(65
|
)
|
(54
|
)
|
(119
|
)
|
(129
|
)
|
Credit facilities unutilized
|
2,924
|
|
996
|
|
3,920
|
|
3,943
|
|
Credit Facilities
|
|
|
||
($ millions)
|
Amount
|
|
Maturity
|
|
Unsecured committed revolving credit facilities
|
|
|
||
Regulated utilities
|
|
|
||
ITC
(1)
|
US
|
900
|
|
October 2022
|
UNS Energy
|
US
|
500
|
|
October 2022
|
Central Hudson
|
US
|
250
|
|
(2)
|
FortisBC Energy
|
700
|
|
August 2023
|
|
FortisAlberta
|
250
|
|
August 2023
|
|
FortisBC Electric
|
150
|
|
April 2023
|
|
Other Electric
|
190
|
|
(3)
|
|
Other Electric
|
US
|
50
|
|
January 2020
|
Corporate and Other
|
1,350
|
|
(4)
|
|
Other facilities
|
|
|
||
Central Hudson - uncommitted credit facility
|
US
|
40
|
|
n/a
|
FortisBC Electric - unsecured demand overdraft facility
|
10
|
|
n/a
|
|
Other Electric - unsecured demand facilities
|
25
|
|
n/a
|
|
Other Electric - unsecured demand facility and emergency
standby loan
|
US
|
60
|
|
April 2019
|
Corporate and Other - unsecured non-revolving facility
|
35
|
|
n/a
|
(1)
|
ITC also has a US
$400 million
commercial paper program, under which
no
amounts were outstanding as at
December 31, 2018
.
|
(2)
|
US
$50 million
in July 2020 and US
$200 million
in October 2020
|
(3)
|
$50 million
in February 2019,
$40 million
in June 2021, and
$100 million
in August 2023
|
(4)
|
$1.3 billion
in July 2023, with the option to increase by an amount up to
$500 million
, and
$50 million
in April 2021
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
29
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
30
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
31
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
32
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
33
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
34
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
35
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
36
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
37
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
38
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
39
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
40
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
41
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
42
|
December 31, 2018
|
|
(in millions)
|
Level 1
(1)
|
Level 2
(1)
|
|
Level 3
(1)
|
|
Total
|
|
|||||
As at December 31, 2018
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (3)
|
$
|
—
|
|
$
|
33
|
|
$
|
8
|
|
$
|
41
|
|
Energy contracts not subject to regulatory deferral
(2)
|
—
|
|
13
|
|
3
|
|
16
|
|
||||
Other investments
(4)
|
155
|
|
—
|
|
—
|
|
155
|
|
||||
|
$
|
155
|
|
$
|
46
|
|
$
|
11
|
|
$
|
212
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(3) (5)
|
$
|
—
|
|
$
|
(86
|
)
|
$
|
(3
|
)
|
$
|
(89
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
Foreign exchange contracts, interest rate and total return swaps
(6)
|
(8
|
)
|
(1
|
)
|
—
|
|
(9
|
)
|
||||
|
$
|
(8
|
)
|
$
|
(88
|
)
|
$
|
(3
|
)
|
$
|
(99
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
43
|
December 31, 2018
|
|
(in millions)
|
Level 1
(1)
|
Level 2
(1)
|
|
Level 3
(1)
|
|
Total
|
|
|||||
As at December 31, 2017
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (3)
|
$
|
—
|
|
$
|
19
|
|
$
|
2
|
|
$
|
21
|
|
Energy contracts not subject to regulatory deferral
(2)
|
—
|
|
26
|
|
4
|
|
30
|
|
||||
Foreign exchange contracts
(6)
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Other investments
(4)
|
78
|
|
—
|
|
—
|
|
78
|
|
||||
|
$
|
81
|
|
$
|
45
|
|
$
|
6
|
|
$
|
132
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(3) (5)
|
$
|
(1
|
)
|
$
|
(103
|
)
|
$
|
(2
|
)
|
$
|
(106
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
||||
Interest rate and total return swaps
(6)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
|
$
|
(1
|
)
|
$
|
(104
|
)
|
$
|
(3
|
)
|
$
|
(108
|
)
|
(1)
|
Under the hierarchy, fair value is determined using: (i) level 1 - unadjusted quoted prices in active markets; (ii) level 2 - other pricing inputs directly or indirectly observable in the marketplace; and (iii) level 3 - unobservable inputs, used when observable inputs are not available. Classifications reflect the lowest level of input that is significant to the fair value measurement.
|
(2)
|
Included in accounts receivable and other current assets or other assets
|
(3)
|
Unrealized gains and losses arising from changes in fair value of these contracts are deferred as a regulatory asset or liability for recovery from, or refund to, customers in future rates as permitted by the regulators, with the exception of long-term wholesale trading contracts and certain gas swap contracts.
|
(4)
|
Included in other assets
|
(5)
|
Included in accounts payable and other current liabilities or other liabilities
|
(6)
|
Included in accounts receivable and other current assets, accounts payable and other current liabilities or other liabilities
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
44
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
45
|
December 31, 2018
|
|
Volume
|
2018
|
|
2017
|
|
Energy contracts subject to regulatory deferral
|
|
|
||
Electricity swap contracts
(GWh)
|
774
|
|
1,291
|
|
Electricity power purchase contracts
(GWh)
|
651
|
|
761
|
|
Gas swap contracts
(PJ)
|
203
|
|
216
|
|
Gas supply contract premiums
(PJ)
|
266
|
|
219
|
|
Energy contracts not subject to regulatory deferral
|
|
|
||
Wholesale trading contracts
(GWh)
|
1,440
|
|
2,387
|
|
Gas swap contracts
(PJ)
|
37
|
|
36
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
46
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
47
|
December 31, 2018
|
|
Sensitivity Analysis
|
|
|
|
|
Health Care Cost
Trend Rate -
1% change
|
|||||||
Year Ended December 31, 2018
|
Rate of Return -
1% change
|
Discount Rate -
1% change
|
||||||||||
(Decrease) increase
|
||||||||||||
($ millions)
|
Increase
|
Decrease
|
Increase
|
Decrease
|
Increase
|
Decrease
|
||||||
Defined Benefit Pension Plans:
|
|
|
|
|
|
|
||||||
Net pension benefit cost
|
(26
|
)
|
23
|
|
(39
|
)
|
57
|
|
n/a
|
|
n/a
|
|
Projected benefit obligation
(1)
|
15
|
|
(57
|
)
|
(405
|
)
|
509
|
|
n/a
|
|
n/a
|
|
OPEB Plans:
|
|
|
|
|
|
|
||||||
Net OPEB cost
|
(3
|
)
|
3
|
|
(8
|
)
|
12
|
|
17
|
|
(11
|
)
|
Accumulated benefit obligation
|
n/a
|
|
n/a
|
|
(88
|
)
|
111
|
|
85
|
|
(67
|
)
|
(1)
|
At FortisBC Energy and FortisBC Electric, certain defined benefit pension plans have pension indexing provisions that provide for a portion of investment returns to be allocated in order to provide for indexing of pension benefits. Therefore, a change in the expected long‑term rate of return on pension plan assets has an impact on the projected benefit obligation.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
48
|
December 31, 2018
|
|
Inter-Company Transactions
|
|
|
||
Years ended December 31
|
|
|
||
($ millions)
|
2018
|
|
2017
|
|
Sale of capacity from Waneta Expansion to FortisBC Electric
|
47
|
|
46
|
|
Lease of gas storage capacity and gas sales from Aitken Creek to
FortisBC Energy
|
25
|
|
24
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
49
|
December 31, 2018
|
|
Selected Annual Financial Information
|
|
|
|
|||
Years ended December 31
|
|
|
|
|||
($ millions, except per share amounts)
|
2018
|
|
2017
|
|
2016
|
|
Revenue
|
8,390
|
|
8,301
|
|
6,838
|
|
Net earnings
|
1,286
|
|
1,125
|
|
713
|
|
Net earnings attributable to common equity shareholders
|
1,100
|
|
963
|
|
585
|
|
Basic earnings per common share
|
2.59
|
|
2.32
|
|
1.89
|
|
Diluted earnings per common share
|
2.59
|
|
2.31
|
|
1.89
|
|
Adjusted earnings per common share
|
2.51
|
|
2.47
|
|
2.33
|
|
|
|
|
|
|||
Total assets
|
53,051
|
|
47,822
|
|
47,904
|
|
Long-term debt (excluding current portion)
|
23,159
|
|
20,691
|
|
20,817
|
|
Preference shares
|
1,623
|
|
1,623
|
|
1,623
|
|
Common shareholders' equity
|
14,910
|
|
13,380
|
|
12,974
|
|
|
|
|
|
|||
Dividends declared per:
|
|
|
|
|||
Common share
|
1.75
|
|
1.65
|
|
1.55
|
|
First Preference Share, Series E
(1)
|
—
|
|
—
|
|
0.6126
|
|
First Preference Share, Series F
|
1.2250
|
|
1.2250
|
|
1.2250
|
|
First Preference Share, Series G
(2)
|
1.0345
|
|
0.9708
|
|
0.9708
|
|
First Preference Share, Series H
|
0.6250
|
|
0.6250
|
|
0.6250
|
|
First Preference Share, Series I
|
0.7116
|
|
0.5262
|
|
0.4874
|
|
First Preference Share, Series J
|
1.1875
|
|
1.1875
|
|
1.1875
|
|
First Preference Share, Series K
|
1.0000
|
|
1.0000
|
|
1.0000
|
|
First Preference Share, Series M
|
1.0250
|
|
1.0250
|
|
1.0250
|
|
(1)
|
In September 2016 the Corporation redeemed all of the issued and outstanding First Preference Shares, Series E.
|
(2)
|
The annual dividend per share for the First Preference Shares, Series G was reset from $0.9708 to $1.0983 for the five-year period from September 1, 2018 up to but excluding September 1, 2023.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
50
|
December 31, 2018
|
|
Summary of Electricity and Energy Sales and Gas Volumes
|
|
|
|
|||
Fourth Quarters Ended December 31
|
2018
|
|
2017
|
|
Variance
|
|
Regulated Utilities
|
|
|
|
|||
UNS Energy - Electricity Sales
(GWh)
|
4,751
|
|
3,553
|
|
1,198
|
|
UNS Energy - Gas Volumes
(PJ)
|
5
|
|
4
|
|
1
|
|
Central Hudson - Electricity Sales
(GWh)
|
1,250
|
|
1,195
|
|
55
|
|
Central Hudson - Gas Volumes
(PJ)
|
7
|
|
6
|
|
1
|
|
FortisBC Energy
(PJ)
|
63
|
|
69
|
|
(6
|
)
|
FortisAlberta
(GWh)
|
4,343
|
|
4,328
|
|
15
|
|
FortisBC Electric
(GWh)
|
839
|
|
869
|
|
(30
|
)
|
Other Electric
(GWh)
|
2,443
|
|
2,376
|
|
67
|
|
Non-Regulated - Energy Infrastructure
(GWh)
|
85
|
|
129
|
|
(44
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
51
|
December 31, 2018
|
|
Summary of Consolidated Cash Flows
|
|
|
|
|||
Fourth Quarters Ended December 31
|
|
|
|
|||
($ millions)
|
2018
|
|
2017
|
|
Variance
|
|
Cash, Beginning of Period
|
195
|
|
252
|
|
(57
|
)
|
Cash Provided by (Used in):
|
|
|
|
|||
Operating Activities
|
537
|
|
766
|
|
(229
|
)
|
Investing Activities
|
(999
|
)
|
(882
|
)
|
(117
|
)
|
Financing Activities
|
598
|
|
191
|
|
407
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
16
|
|
—
|
|
16
|
|
Cash Associated with Assets Held for Sale
|
(15
|
)
|
—
|
|
(15
|
)
|
Cash, End of Period
|
332
|
|
327
|
|
5
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
52
|
December 31, 2018
|
|
Summary of Quarterly Results
|
|
Net Earnings
|
|
|
|
|
Attributable to
|
||
|
|
Common Equity
|
Earnings per Common Share
|
|
|
Revenue
|
Shareholders
|
Basic
|
Diluted
|
Quarter Ended
|
($ millions)
|
($ millions)
|
($)
|
($)
|
December 31, 2018
|
2,206
|
261
|
0.61
|
0.61
|
September 30, 2018
|
2,040
|
276
|
0.65
|
0.65
|
June 30, 2018
|
1,947
|
240
|
0.57
|
0.57
|
March 31, 2018
|
2,197
|
323
|
0.77
|
0.76
|
December 31, 2017
|
2,111
|
134
|
0.32
|
0.31
|
September 30, 2017
|
1,901
|
278
|
0.66
|
0.66
|
June 30, 2017
|
2,015
|
257
|
0.62
|
0.62
|
March 31, 2017
|
2,274
|
294
|
0.72
|
0.72
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
53
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
54
|
December 31, 2018
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
55
|
December 31, 2018
|
1.
|
I have reviewed this annual report on Form 40-F of Fortis Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
|
4.
|
The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
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5.
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The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
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4.
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The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
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5.
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The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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