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Exhibit
|
Description
|
|
|
|
|
|
|
|
|
|
Fortis Inc.
(Registrant)
|
|
|||
Date: May 1, 2019
|
/s/ Jocelyn H. Perry
|
||||
|
By:
|
Jocelyn H. Perry
|
|||
|
Title:
|
Executive Vice President, Chief Financial Officer
|
|||
|
|
|
|
•
|
First quarter 2019 net earnings of
$0.72
per common share
|
•
|
Adjusted net earnings
2
of $0.74 per common share, up from $0.70 in the same period last year
|
•
|
Annual capital expenditure plan on track with $0.7 billion invested during the quarter
|
•
|
Completed sale of interest in Waneta Expansion Hydroelectric Project for approximately $1 billion
|
•
|
Completed the repurchase of US$400 million corporate debt
|
1
|
Financial information is presented in Canadian dollars unless otherwise specified.
|
2
|
Non-US GAAP Measures - Fortis uses financial measures that do not have a standardized meaning under generally accepted accounting principles in the United States of America ("US GAAP") and may not be comparable to similar measures presented by other entities. Fortis calculated the non-US GAAP measures by adjusting certain US GAAP measures for specific items that management excludes in its key decision-making processes and evaluation of operating results. Refer to the Non-US GAAP Reconciliation provided in this news release.
|
|
i
|
|
|
|
ii
|
|
|
|
Quarter Ended March 31
|
||||||||
(in millions, except earnings per share)
|
2019
|
|
2018
|
|
Variance
|
|
|||
Net Earnings Attributable to Common Equity Shareholders
|
$
|
311
|
|
$
|
323
|
|
$
|
(12
|
)
|
Adjusting Items
|
|
|
|
||||||
Unrealized loss on mark-to-market of derivatives
(1)
|
5
|
|
4
|
|
1
|
|
|||
Consolidated state income tax election
(2)
|
—
|
|
(30
|
)
|
30
|
|
|||
Adjusted Net Earnings Attributable to Common Equity Shareholders
|
$
|
316
|
|
$
|
297
|
|
$
|
19
|
|
Adjusted Basic Earnings per Share
|
$
|
0.74
|
|
$
|
0.70
|
|
$
|
0.04
|
|
(1)
|
Represents timing differences related to the accounting of natural gas derivatives at the Aitken Creek natural gas storage facility, included in the Energy Infrastructure segment
|
(2)
|
Remeasurement of deferred income tax liabilities, included in the Corporate and Other segment
|
Teleconference to Discuss First Quarter 2019 Results
A teleconference and webcast will be held on May 1, 2019 at 8:30 a.m. (Eastern). Barry Perry, President and Chief Executive Officer, and Jocelyn Perry, Executive Vice President, Chief Financial Officer, will discuss the Corporation's first quarter 2019 results.
Analysts, members of the media and other interested parties in North America are invited to participate by calling 1.877.223.4471. International participants may participate by calling 647.788.4922. Please dial in 10 minutes prior to the start of the call. No pass code is required.
A live and archived audio webcast of the teleconference will be available on the Corporation's website, www.fortisinc.com.
A replay of the conference will be available two hours after the conclusion of the call until June 1, 2019. Please call 1.800.585.8367 or 416.621.4642 and enter pass code 7135897.
|
|
iii
|
|
|
Investor Enquiries
|
Media Enquiries
|
Ms. Stephanie Amaimo
|
Ms. Karen McCarthy
|
Vice President, Investor Relations
|
Vice President, Communications & Corporate Affairs
|
Fortis Inc.
|
Fortis Inc.
|
248.946.3572
|
709.737.5323
|
investorrelations@fortisinc.com
|
media@fortisinc.com
|
|
iv
|
|
|
|
|
|
F -
1
|
|
|
F -
2
|
|
|
F -
3
|
|
|
F -
4
|
|
|
F -
5
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
6
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
7
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
8
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
Quarter Ended
|
|||
|
March 31
|
|||
($ millions)
|
2019
|
|
2018
|
|
Sale of capacity from Waneta Expansion to FortisBC Electric
|
16
|
|
15
|
|
Lease of gas storage capacity and gas sales from Aitken Creek to FortisBC Energy
|
6
|
|
7
|
|
|
F -
9
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (unaudited)
|
|
REGULATED
|
|
NON-REGULATED
|
|
|
|||||||||||||||||||||
Quarter Ended
|
|
|
|
|
|
|
Energy
|
|
Inter-
|
|
||||||||||||||||
March 31, 2019
|
|
UNS
|
Central
|
|
FortisBC
|
Fortis
|
FortisBC
|
Other
|
Sub
|
|
Infra-
|
Corporate
|
segment
|
|
||||||||||||
($ millions)
|
ITC
|
Energy
|
Hudson
|
|
Energy
|
Alberta
|
Electric
|
Electric
|
Total
|
|
structure
|
and Other
|
eliminations
|
Total
|
||||||||||||
Revenue
|
408
|
|
543
|
|
277
|
|
|
485
|
|
145
|
|
119
|
|
426
|
|
2,403
|
|
|
36
|
|
—
|
|
(3
|
)
|
2,436
|
|
Energy supply costs
|
—
|
|
232
|
|
92
|
|
|
181
|
|
—
|
|
40
|
|
287
|
|
832
|
|
|
1
|
|
—
|
|
—
|
|
833
|
|
Operating expenses
|
124
|
|
152
|
|
118
|
|
|
83
|
|
41
|
|
25
|
|
47
|
|
590
|
|
|
14
|
|
15
|
|
(3
|
)
|
616
|
|
Depreciation and amortization
|
63
|
|
74
|
|
20
|
|
|
59
|
|
52
|
|
16
|
|
42
|
|
326
|
|
|
8
|
|
—
|
|
—
|
|
334
|
|
Operating income
|
221
|
|
85
|
|
47
|
|
|
162
|
|
52
|
|
38
|
|
50
|
|
655
|
|
|
13
|
|
(15
|
)
|
—
|
|
653
|
|
Other income, net
|
10
|
|
9
|
|
4
|
|
|
3
|
|
1
|
|
1
|
|
1
|
|
29
|
|
|
1
|
|
8
|
|
—
|
|
38
|
|
Finance charges
|
77
|
|
33
|
|
11
|
|
|
35
|
|
25
|
|
18
|
|
20
|
|
219
|
|
|
1
|
|
49
|
|
—
|
|
269
|
|
Income tax expense
|
42
|
|
6
|
|
8
|
|
|
30
|
|
1
|
|
5
|
|
5
|
|
97
|
|
|
—
|
|
(31
|
)
|
—
|
|
66
|
|
Net earnings
|
112
|
|
55
|
|
32
|
|
|
100
|
|
27
|
|
16
|
|
26
|
|
368
|
|
|
13
|
|
(25
|
)
|
—
|
|
356
|
|
Non-controlling interests
|
20
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
3
|
|
23
|
|
|
5
|
|
—
|
|
—
|
|
28
|
|
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
17
|
|
—
|
|
17
|
|
Net earnings attributable to common equity shareholders
|
92
|
|
55
|
|
32
|
|
|
100
|
|
27
|
|
16
|
|
23
|
|
345
|
|
|
8
|
|
(42
|
)
|
—
|
|
311
|
|
Goodwill
|
8,193
|
|
1,844
|
|
602
|
|
|
913
|
|
228
|
|
235
|
|
256
|
|
12,271
|
|
|
27
|
|
—
|
|
—
|
|
12,298
|
|
Total assets
|
19,603
|
|
10,007
|
|
3,601
|
|
|
6,962
|
|
4,700
|
|
2,271
|
|
4,121
|
|
51,265
|
|
|
1,466
|
|
141
|
|
(67
|
)
|
52,805
|
|
Capital expenditures
|
236
|
|
167
|
|
64
|
|
|
70
|
|
107
|
|
25
|
|
56
|
|
725
|
|
|
6
|
|
9
|
|
—
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Quarter Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue
|
354
|
|
444
|
|
275
|
|
|
429
|
|
141
|
|
112
|
|
397
|
|
2,152
|
|
|
48
|
|
—
|
|
(3
|
)
|
2,197
|
|
Energy supply costs
|
—
|
|
162
|
|
119
|
|
|
134
|
|
—
|
|
43
|
|
270
|
|
728
|
|
|
1
|
|
—
|
|
—
|
|
729
|
|
Operating expenses
|
103
|
|
139
|
|
105
|
|
|
76
|
|
42
|
|
26
|
|
45
|
|
536
|
|
|
13
|
|
7
|
|
(3
|
)
|
553
|
|
Depreciation and amortization
|
56
|
|
65
|
|
17
|
|
|
55
|
|
47
|
|
15
|
|
39
|
|
294
|
|
|
8
|
|
—
|
|
—
|
|
302
|
|
Operating income
|
195
|
|
78
|
|
34
|
|
|
164
|
|
52
|
|
28
|
|
43
|
|
594
|
|
|
26
|
|
(7
|
)
|
—
|
|
613
|
|
Other income, net
|
10
|
|
2
|
|
2
|
|
|
1
|
|
—
|
|
1
|
|
(1
|
)
|
15
|
|
|
—
|
|
(6
|
)
|
—
|
|
9
|
|
Finance charges
|
68
|
|
25
|
|
10
|
|
|
33
|
|
25
|
|
10
|
|
19
|
|
190
|
|
|
1
|
|
45
|
|
—
|
|
236
|
|
Income tax expense
|
32
|
|
5
|
|
5
|
|
|
34
|
|
—
|
|
3
|
|
4
|
|
83
|
|
|
2
|
|
(63
|
)
|
—
|
|
22
|
|
Net earnings
|
105
|
|
50
|
|
21
|
|
|
98
|
|
27
|
|
16
|
|
19
|
|
336
|
|
|
23
|
|
5
|
|
—
|
|
364
|
|
Non-controlling interests
|
19
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
1
|
|
20
|
|
|
5
|
|
—
|
|
—
|
|
25
|
|
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
16
|
|
—
|
|
16
|
|
Net earnings attributable to common equity shareholders
|
86
|
|
50
|
|
21
|
|
|
98
|
|
27
|
|
16
|
|
18
|
|
316
|
|
|
18
|
|
(11
|
)
|
—
|
|
323
|
|
Goodwill
|
7,913
|
|
1,781
|
|
582
|
|
|
913
|
|
227
|
|
235
|
|
249
|
|
11,900
|
|
|
27
|
|
—
|
|
—
|
|
11,927
|
|
Total assets
|
18,291
|
|
8,875
|
|
3,312
|
|
|
6,426
|
|
4,462
|
|
2,224
|
|
3,888
|
|
47,478
|
|
|
1,559
|
|
106
|
|
(60
|
)
|
49,083
|
|
Capital expenditures
|
223
|
|
125
|
|
48
|
|
|
86
|
|
119
|
|
29
|
|
53
|
|
683
|
|
|
2
|
|
—
|
|
—
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F -
10
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
As at
|
|||
|
March 31,
|
|
December 31,
|
|
($ millions
)
|
2019
|
|
2018
|
|
Regulatory assets
|
|
|
||
Deferred income taxes
|
1,543
|
|
1,532
|
|
Employee future benefits
|
470
|
|
485
|
|
Deferred energy management costs
|
239
|
|
230
|
|
Rate stabilization and related accounts
|
128
|
|
90
|
|
Deferred lease costs
|
119
|
|
110
|
|
Deferred operating overhead costs
|
108
|
|
103
|
|
Generation early retirement costs
|
93
|
|
98
|
|
Manufactured gas plant site remediation deferral
|
68
|
|
73
|
|
Derivatives
|
65
|
|
57
|
|
Other regulatory assets
|
399
|
|
400
|
|
Total regulatory assets
|
3,232
|
|
3,178
|
|
Less: Current portion
|
(330
|
)
|
(324
|
)
|
Long-term regulatory assets
|
2,902
|
|
2,854
|
|
|
|
|
||
Regulatory liabilities
|
|
|
||
Deferred income taxes
|
1,534
|
|
1,574
|
|
Asset removal cost provision
|
1,166
|
|
1,169
|
|
ROE complaints liability
|
204
|
|
206
|
|
Rate stabilization and related accounts
|
191
|
|
220
|
|
Energy efficiency liability
|
101
|
|
106
|
|
Renewable energy surcharge
|
87
|
|
85
|
|
Electric and gas moderator account
|
55
|
|
60
|
|
Other regulatory liabilities
|
226
|
|
206
|
|
Total regulatory liabilities
|
3,564
|
|
3,626
|
|
Less: Current portion
|
(657
|
)
|
(656
|
)
|
Long-term regulatory liabilities
|
2,907
|
|
2,970
|
|
|
|
|
|
F -
11
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
As at
|
|||||
|
March 31,
|
|
December 31,
|
|
||
($ millions)
|
2019
|
|
2018
|
|
||
Cash
|
$
|
9
|
|
$
|
15
|
|
Accounts receivable and other current assets
|
5
|
|
3
|
|
||
Property, plant and equipment
|
713
|
|
718
|
|
||
Intangible assets
|
30
|
|
30
|
|
||
Total assets held for sale
|
$
|
757
|
|
$
|
766
|
|
|
|
|
||||
Accounts payable and other current liabilities
|
$
|
1
|
|
$
|
2
|
|
Other liabilities
|
68
|
|
67
|
|
||
Total liabilities associated with assets held for sale
|
$
|
69
|
|
$
|
69
|
|
|
|
As at
|
|||
|
|
March 31,
|
|
December 31,
|
|
($ millions
)
|
2019
|
|
2018
|
|
|
Long-term debt
|
22,894
|
|
23,165
|
|
|
Credit facility borrowings
|
1,095
|
|
1,066
|
|
|
Total long-term debt
|
23,989
|
|
24,231
|
|
|
Less: Deferred financing costs and debt discounts
|
(141
|
)
|
(146
|
)
|
|
Less: Current installments of long-term debt
|
(1,237
|
)
|
(926
|
)
|
|
|
22,611
|
|
23,159
|
|
|
Month
|
Interest Rate
|
|
|
|
Use of
|
|||
($ millions, except %)
|
Issued
|
(%)
|
|
Maturity
|
Amount
|
|
Proceeds
|
||
ITC - Secured Notes
|
January
|
4.55
|
|
2049
|
|
US
|
50
|
|
(1)(2)(3)
|
FortisTCI - Unsecured non-revolving term loan
(4)
|
February
|
(5
|
)
|
2025
|
|
US
|
5
|
|
(2)(3)
|
(1)
|
Repay credit facility borrowings
|
(2)
|
Finance capital expenditures
|
(3)
|
General corporate purposes
|
(4)
|
Maximum amount of borrowings under this agreement of US$10 million has been withdrawn.
|
(5)
|
Floating rate of a one-month LIBOR plus a spread of 1.75%
|
|
F -
12
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
|
|
As at
|
|||||
|
Regulated
|
|
Corporate
|
|
March 31,
|
|
December 31,
|
|
($ millions)
|
Utilities
|
|
and Other
|
|
2019
|
|
2018
|
|
Total credit facilities
|
3,836
|
|
1,381
|
|
5,217
|
|
5,165
|
|
Credit facilities utilized:
|
|
|
|
|
|
|
|
|
Short-term borrowings
(1)
|
(169
|
)
|
—
|
|
(169
|
)
|
(60
|
)
|
Long-term debt (including
current portion)
(2)
|
(851
|
)
|
(244
|
)
|
(1,095
|
)
|
(1,066
|
)
|
Letters of credit outstanding
|
(65
|
)
|
(53
|
)
|
(118
|
)
|
(119
|
)
|
Credit facilities unutilized
|
2,751
|
|
1,084
|
|
3,835
|
|
3,920
|
|
(1)
|
The weighted average interest rate was approximately
3.2%
(
December 31, 2018
-
4.2%
).
|
(2)
|
The weighted average interest rate was approximately
2.9%
(
December 31, 2018
-
3.3%
). The current portion was
$776 million
(
December 31, 2018
-
$735 million
).
|
|
As at
|
|
($ millions)
|
March 31, 2019
|
|
Operating Leases
|
|
|
Other assets
|
45
|
|
Accounts payable and other current liabilities
|
7
|
|
Other liabilities
|
37
|
|
|
|
|
Finance Leases
|
|
|
Regulatory assets
|
119
|
|
Property, plant and equipment, net
|
442
|
|
Current installments of finance leases
|
236
|
|
Finance leases
|
339
|
|
|
F -
13
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
The components of lease expense were as follows.
|
Quarter Ended
|
|
($ millions)
|
March 31, 2019
|
|
Operating lease cost
|
2
|
|
Finance lease cost:
|
|
|
Amortization
|
4
|
|
Interest
|
12
|
|
Variable lease cost
|
9
|
|
Total lease cost
|
27
|
|
($ millions)
|
Operating Leases
|
|
Finance
Leases
|
|
Total
|
|
April - December 2019
|
7
|
|
263
|
|
270
|
|
2020
|
8
|
|
59
|
|
67
|
|
2021
|
7
|
|
32
|
|
39
|
|
2022
|
6
|
|
33
|
|
39
|
|
2023
|
5
|
|
33
|
|
38
|
|
Thereafter
|
23
|
|
1,109
|
|
1,132
|
|
|
56
|
|
1,529
|
|
1,585
|
|
Less: Imputed interest
|
(12
|
)
|
(954
|
)
|
(966
|
)
|
Total lease obligations
|
44
|
|
575
|
|
619
|
|
Less: Current installments
|
(7
|
)
|
(236
|
)
|
(243
|
)
|
|
37
|
|
339
|
|
376
|
|
($ millions)
|
|
|
Total
|
|
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
|
|
|
F -
14
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
Supplemental lease information was as follows.
|
As at
|
|
|
March 31, 2019
|
|
Weighted-Average Remaining Lease Term
(years)
|
|
|
Operating leases
|
10
|
|
Finance leases
|
22
|
|
Weighted-Average Discount Rate
(%)
|
|
|
Operating leases
|
4.2
|
|
Finance leases
|
5.4
|
|
|
Quarter ended
|
|
($ millions)
|
March 31, 2019
|
|
Cash Payments Included in Lease Liabilities
|
|
|
Operating cash flows used in operating leases
|
(2
|
)
|
Operating cash flows used in finance leases
|
(5
|
)
|
Financing cash flows used in finance leases
|
(15
|
)
|
Right-of-Use Assets Obtained in Exchange for New Lease Liabilities
|
|
|
Operating leases
|
46
|
|
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||
($ millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Quarter Ended March 31
|
|
|
|
|
||||
Components of net benefit cost
|
|
|
|
|
||||
Service costs
|
19
|
|
21
|
|
7
|
|
8
|
|
Interest costs
|
31
|
|
28
|
|
6
|
|
6
|
|
Expected return on plan assets
|
(40
|
)
|
(40
|
)
|
(4
|
)
|
(4
|
)
|
Amortization of actuarial losses (gains)
|
6
|
|
12
|
|
(1
|
)
|
—
|
|
Amortization of past service credits/plan amendments
|
—
|
|
—
|
|
(2
|
)
|
(3
|
)
|
Regulatory adjustments
|
1
|
|
—
|
|
2
|
|
1
|
|
Net benefit cost
|
17
|
|
21
|
|
8
|
|
8
|
|
|
F -
15
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
Quarter ended
March 31
|
|||
($ millions)
|
2019
|
|
2018
|
|
Equity component of allowance for funds used during construction
|
18
|
|
15
|
|
Derivative gains (losses)
|
7
|
|
(4
|
)
|
Interest income
|
4
|
|
4
|
|
Other
|
9
|
|
(6
|
)
|
|
38
|
|
9
|
|
|
2019
|
2018
|
||||||||||
|
Net Earnings
|
|
Weighted
|
|
|
Net Earnings
|
|
Weighted
|
|
|
||
|
to Common
|
|
Average
|
|
|
to Common
|
|
Average
|
|
|
||
|
Shareholders
|
|
Shares
|
|
EPS
|
|
Shareholders
|
|
Shares
|
|
EPS
|
|
|
($ millions)
|
|
(# millions)
|
|
($)
|
|
($ millions)
|
|
(# millions)
|
|
($)
|
|
Quarter Ended March 31
|
|
|
|
|
|
|
||||||
Basic EPS
|
311
|
|
429.5
|
|
0.72
|
|
323
|
|
422.0
|
|
0.77
|
|
Potential dilutive effect of stock options
|
—
|
|
0.6
|
|
|
—
|
|
0.5
|
|
|
||
Diluted EPS
|
311
|
|
430.1
|
|
0.72
|
|
323
|
|
422.5
|
|
0.76
|
|
|
F -
16
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
Quarter Ended
|
|||
|
March 31
|
|||
($ millions)
|
2019
|
|
2018
|
|
Change in working capital
|
|
|
||
Accounts receivable and other current assets
|
(102
|
)
|
(16
|
)
|
Prepaid expenses
|
(3
|
)
|
3
|
|
Inventories
|
23
|
|
52
|
|
Regulatory assets - current portion
|
(6
|
)
|
10
|
|
Accounts payable and other current liabilities
|
(57
|
)
|
(107
|
)
|
Regulatory liabilities - current portion
|
7
|
|
(43
|
)
|
|
(138
|
)
|
(101
|
)
|
|
|
|
||
Non-cash investing and financing activities
|
|
|
||
Accrued capital expenditures
|
298
|
|
272
|
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
46
|
|
—
|
|
Contributions in aid of construction
|
13
|
|
(19
|
)
|
Common share dividends reinvested
|
75
|
|
63
|
|
Exercise of stock options into common shares
|
2
|
|
1
|
|
|
F -
17
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
18
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
($ millions)
|
Level 1
(1)
|
Level 2
(1)
|
|
Level 3
(1)
|
|
Total
|
|
|
As at March 31, 2019
|
|
|
|
|
||||
Assets
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(2) (3)
|
—
|
|
38
|
|
12
|
|
50
|
|
Energy contracts not subject to regulatory deferral
(2)
|
—
|
|
8
|
|
2
|
|
10
|
|
Total return swaps
(2)
|
4
|
|
—
|
|
—
|
|
4
|
|
Other investments
(4)
|
131
|
|
—
|
|
—
|
|
131
|
|
|
135
|
|
46
|
|
14
|
|
195
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(3) (5)
|
—
|
|
(84
|
)
|
(15
|
)
|
(99
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
(4
|
)
|
—
|
|
(4
|
)
|
Foreign exchange contracts
(5)
|
(4
|
)
|
—
|
|
—
|
|
(4
|
)
|
|
(4
|
)
|
(88
|
)
|
(15
|
)
|
(107
|
)
|
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
(5)
|
(8
|
)
|
(1
|
)
|
—
|
|
(9
|
)
|
|
(8
|
)
|
(88
|
)
|
(3
|
)
|
(99
|
)
|
(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. The change in level 3 from December 31, 2018 was immaterial.
|
(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
|
|
F -
19
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
Energy Contracts
|
Gross Amount Recognized in Balance Sheet
|
|
Counterparty Netting of Energy Contracts
|
|
Cash Collateral Received/
Posted
|
|
Net Amount
|
|
($ millions)
|
||||||||
As at March 31, 2019
|
|
|
|
|
||||
Derivative assets
|
60
|
|
35
|
|
56
|
|
(31
|
)
|
Derivative liabilities
|
(103
|
)
|
(35
|
)
|
—
|
|
(68
|
)
|
As at December 31, 2018
|
|
|
|
|
||||
Derivative assets
|
57
|
|
28
|
|
16
|
|
13
|
|
Derivative liabilities
|
(90
|
)
|
(28
|
)
|
—
|
|
(62
|
)
|
|
As at
|
|||
|
March 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
|
Energy contracts subject to regulatory deferral
(1)
|
|
|
||
Electricity swap contracts
(GWh)
|
407
|
|
774
|
|
Electricity power purchase contracts
(GWh)
|
2,838
|
|
651
|
|
Gas swap contracts
(PJ)
|
190
|
|
203
|
|
Gas supply contract premiums
(PJ)
|
245
|
|
266
|
|
Energy contracts not subject to regulatory deferral
(1)
|
|
|
|
|
Wholesale trading contracts
(GWh)
|
706
|
|
1,440
|
|
Gas swap contracts
(PJ)
|
35
|
|
37
|
|
(1)
|
GWh means gigawatt hours and PJ means petajoules.
|
|
F -
20
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
21
|
|
FORTIS INC.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2019 and 2018 (Unaudited)
|
|
F -
22
|
|
|
TABLE OF CONTENTS
|
|||
Corporate Overview
|
Cash Flow Summary
|
||
Performance Overview
|
Contractual Obligations
|
||
Business Unit Performance
|
Capital Structure and Credit Ratings
|
||
ITC
|
Capital Expenditure Plan
|
||
UNS Energy
|
Business Risk Management
|
||
Central Hudson
|
Off-Balance Sheet Arrangements
|
||
FortisBC Energy
|
Financial Instruments
|
||
FortisAlberta
|
Related-Party and Inter-Company Transactions
|
||
FortisBC Electric
|
Summary of Quarterly Results
|
||
Other Electric
|
Critical Accounting Estimates
|
||
Energy Infrastructure
|
Accounting Policy Changes
|
||
Corporate and Other
|
Future Accounting Pronouncements
|
||
Non-US GAAP Financial Measures
|
Outlook
|
||
Regulatory Developments
|
Forward-Looking Information
|
||
Consolidated Financial Position
|
Condensed Consolidated Interim Financial Statements (Unaudited)
|
F-1
|
|
Liquidity and Capital Resources
|
|||
Cash Flow Requirements
|
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
1
|
March 31, 2019
|
|
Key Financial Metrics
|
Quarter Ended March 31
|
|||||
($ millions, except as indicated)
|
2019
|
|
2018
|
|
Variance
|
|
Revenue
|
2,436
|
|
2,197
|
|
239
|
|
Net Earnings Attributable to Common Equity Shareholders
|
|
|
|
|||
Actual
|
311
|
|
323
|
|
(12
|
)
|
Adjusted
(1)
|
316
|
|
297
|
|
19
|
|
Earnings per Common Share
($)
|
|
|
|
|||
Basic
|
0.72
|
|
0.77
|
|
(0.05
|
)
|
Diluted
|
0.72
|
|
0.76
|
|
(0.04
|
)
|
Adjusted
(1)
|
0.74
|
|
0.70
|
|
0.04
|
|
Dividends Paid per Common Share
($)
|
0.450
|
|
0.425
|
|
0.025
|
|
Weighted Average Number of Common Shares Outstanding
(# millions)
|
429.5
|
|
422.0
|
|
7.5
|
|
Cash Flow from Operating Activities
|
541
|
|
589
|
|
(48
|
)
|
Capital Expenditures
|
740
|
|
685
|
|
55
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
2
|
March 31, 2019
|
|
Segmented Common Equity Earnings
|
Quarter Ended March 31
|
|||||||
|
|
|
Variance
|
|||||
($ millions)
|
2019
|
|
2018
|
|
FX
(1)
|
|
Other
|
|
Regulated Utilities
|
|
|
|
|
||||
ITC
|
92
|
|
86
|
|
5
|
|
1
|
|
UNS Energy
|
55
|
|
50
|
|
3
|
|
2
|
|
Central Hudson
|
32
|
|
21
|
|
1
|
|
10
|
|
FortisBC Energy
|
100
|
|
98
|
|
—
|
|
2
|
|
FortisAlberta
|
27
|
|
27
|
|
—
|
|
—
|
|
FortisBC Electric
|
16
|
|
16
|
|
—
|
|
—
|
|
Other Electric
|
23
|
|
18
|
|
—
|
|
5
|
|
Non-Regulated
|
|
|
|
|
|
|||
Energy Infrastructure
|
8
|
|
18
|
|
—
|
|
(10
|
)
|
Corporate and Other
|
(42
|
)
|
(11
|
)
|
—
|
|
(31
|
)
|
Common Equity Earnings
|
311
|
|
323
|
|
9
|
|
(21
|
)
|
(1)
|
FX means foreign exchange.
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||||
|
|
|
Variance
|
|||||
($ millions)
|
2019
|
|
2018
|
|
FX
|
|
Other
|
|
Revenue
|
408
|
|
354
|
|
18
|
|
36
|
|
Earnings
|
92
|
|
86
|
|
5
|
|
1
|
|
(1)
|
Revenue represents 100% of ITC. Earnings represent the Corporation's 80.1% controlling ownership interest in ITC and reflects consolidated purchase price accounting adjustments. The reporting currency of ITC is the US dollar.
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||||
|
|
|
Variance
|
|||||
|
2019
|
|
2018
|
|
FX
|
|
Other
|
|
Electricity sales (
GWh)
(2)
|
4,429
|
|
3,325
|
|
—
|
|
1,104
|
|
Gas volumes (
PJ)
(2)
|
7
|
|
5
|
|
—
|
|
2
|
|
Revenue
($ millions)
|
543
|
|
444
|
|
22
|
|
77
|
|
Earnings
($ millions)
|
55
|
|
50
|
|
3
|
|
2
|
|
(1)
|
Includes Tucson Electric Power Company ("TEP"), UNS Electric, Inc. and UNS Gas, Inc. The reporting currency of UNS Energy is the US dollar.
|
(2)
|
GWh means gigawatts hours and PJ means petajoules.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
3
|
March 31, 2019
|
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||||
|
|
|
Variance
|
|||||
|
2019
|
|
2018
|
|
FX
|
|
Other
|
|
Electricity sales
(GWh)
|
1,289
|
|
1,295
|
|
—
|
|
(6
|
)
|
Gas volumes
(PJ)
|
10
|
|
9
|
|
—
|
|
1
|
|
Revenue
($ millions)
|
277
|
|
275
|
|
14
|
|
(12
|
)
|
Earnings
($ millions)
|
32
|
|
21
|
|
1
|
|
10
|
|
(1)
|
The reporting currency of Central Hudson is the US dollar.
|
Financial Highlights
|
Quarter Ended March 31
|
|||||
|
2019
|
|
2018
|
|
Variance
|
|
Gas volumes
(PJ)
|
83
|
|
80
|
|
3
|
|
Revenue
($ millions)
|
485
|
|
429
|
|
56
|
|
Earnings
($ millions)
|
100
|
|
98
|
|
2
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
4
|
March 31, 2019
|
|
Financial Highlights
|
Quarter Ended March 31
|
|||||
|
2019
|
|
2018
|
|
Variance
|
|
Energy deliveries
(GWh)
|
4,642
|
|
4,603
|
|
39
|
|
Revenue
($ millions)
|
145
|
|
141
|
|
4
|
|
Earnings
($ millions)
|
27
|
|
27
|
|
—
|
|
Financial Highlights
|
Quarter Ended March 31
|
|||||
|
2019
|
|
2018
|
|
Variance
|
|
Electricity sales
(GWh)
|
949
|
|
920
|
|
29
|
|
Revenue
($ millions)
|
119
|
|
112
|
|
7
|
|
Earnings
($ millions)
|
16
|
|
16
|
|
—
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
5
|
March 31, 2019
|
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||||
|
|
|
Variance
|
|||||
|
2019
|
|
2018
|
|
FX
|
|
Other
|
|
Electricity sales
(GWh)
|
2,983
|
|
2,929
|
|
—
|
|
54
|
|
Revenue
($ millions)
|
426
|
|
397
|
|
4
|
|
25
|
|
Earnings
($ millions)
|
23
|
|
18
|
|
—
|
|
5
|
|
(1)
|
Comprised of Newfoundland Power Inc.; Maritime Electric Company, Limited; FortisOntario Inc.; a 39% equity investment in Wataynikaneyap Power Limited Partnership; an approximate
60%
controlling interest in Caribbean Utilities Company, Ltd. ("Caribbean Utilities"); FortisTCI Limited and Turks and Caicos Utilities Limited (collectively "FortisTCI"); and a
33%
equity investment in Belize Electricity Limited ("BEL"). 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$1.00.
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||
|
2019
|
|
2018
|
|
Variance
|
|
Energy sales
(GWh)
|
50
|
|
89
|
|
(39
|
)
|
Revenue
($ millions)
|
36
|
|
48
|
|
(12
|
)
|
Earnings
($ millions)
|
8
|
|
18
|
|
(10
|
)
|
(1)
|
Primarily comprised of long-term contracted generation assets in British Columbia ("BC") and Belize, and Aitken Creek in BC.
|
Financial Highlights
(1)
|
Quarter Ended March 31
|
|||||
($ millions)
|
2019
|
|
2018
|
|
Variance
|
|
Net expenses
|
(42
|
)
|
(11
|
)
|
(31
|
)
|
(1)
|
Includes Fortis net corporate expenses and non-regulated holding company expenses
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
6
|
March 31, 2019
|
|
Non-US GAAP Reconciliation
|
Quarter Ended March 31
|
|||||
($ millions, except as indicated)
|
2019
|
|
2018
|
|
Variance
|
|
Common Equity Earnings
|
311
|
|
323
|
|
(12
|
)
|
Adjusting Items
|
|
|
|
|||
Unrealized loss on mark-to-market of derivatives
(1)
|
5
|
|
4
|
|
1
|
|
Consolidated state income tax election
(2)
|
—
|
|
(30
|
)
|
30
|
|
Adjusted Common Equity Earnings
|
316
|
|
297
|
|
19
|
|
Adjusted Basic EPS
($)
|
0.74
|
|
0.70
|
|
0.04
|
|
(1)
|
Represents timing differences related to the accounting of natural gas derivatives at Aitken Creek, included in the Energy Infrastructure segment
|
(2)
|
Remeasurement of deferred income tax liabilities, included in the Corporate and Other segment
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
7
|
March 31, 2019
|
|
Significant Changes between March 31, 2019 and December 31, 2018
|
|||
|
(Decrease)/Increase
|
|
|
|
FX
|
Other
|
|
Balance Sheet Account
|
($ millions)
|
($ millions)
|
Explanation
|
Goodwill
|
(233)
|
1
|
The other increase was not significant.
|
Short-term borrowings
|
(1)
|
110
|
Due primarily to the issuance of commercial paper at ITC.
|
Long-term debt
(including current portion)
|
(350)
|
113
|
Due primarily to higher borrowings under committed credit facilities at FortisBC Energy.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
8
|
March 31, 2019
|
|
Credit Facilities
|
|
|
As at
|
|
|
|||
|
Regulated
Utilities
|
|
Corporate
and Other
|
|
March 31, 2019
|
|
December 31, 2018
|
|
($ millions)
|
||||||||
Total credit facilities
|
3,836
|
|
1,381
|
|
5,217
|
|
5,165
|
|
Credit facilities utilized:
|
|
|
|
|
||||
Short-term borrowings
|
(169
|
)
|
—
|
|
(169
|
)
|
(60
|
)
|
Long-term debt (including
current portion)
|
(851
|
)
|
(244
|
)
|
(1,095
|
)
|
(1,066
|
)
|
Letters of credit outstanding
|
(65
|
)
|
(53
|
)
|
(118
|
)
|
(119
|
)
|
Credit facilities unutilized
|
2,751
|
|
1,084
|
|
3,835
|
|
3,920
|
|
Summary of Consolidated Cash Flows
|
Quarter Ended March 31
|
|||||
($ millions)
|
2019
|
|
2018
|
|
Variance
|
|
Cash, beginning of period
|
332
|
|
327
|
|
5
|
|
Cash provided by (used in):
|
|
|
|
|||
Operating activities
|
541
|
|
589
|
|
(48
|
)
|
Investing activities
|
(732
|
)
|
(678
|
)
|
(54
|
)
|
Financing activities
|
94
|
|
89
|
|
5
|
|
Foreign exchange
|
(8
|
)
|
6
|
|
(14
|
)
|
Change in cash associated with assets held for sale
|
6
|
|
—
|
|
6
|
|
Cash, end of period
|
233
|
|
333
|
|
(100
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
9
|
March 31, 2019
|
|
Long-Term Debt Issuances
Quarter Ended March 31, 2019
|
Month
|
Interest Rate
|
|
|
|
|
Use of
|
||
($ millions, except %)
|
Issued
|
(%)
|
|
Maturity
|
|
Amount
|
|
Proceeds
|
|
ITC - Secured Notes
|
January
|
4.55
|
|
2049
|
|
US
|
50
|
|
(1)(2)(3)
|
FortisTCI - Unsecured non-revolving term
loan
(4)
|
February
|
(5
|
)
|
2025
|
|
US
|
5
|
|
(2)(3)
|
(1)
|
Repay credit facility borrowings
|
(2)
|
Finance capital expenditures
|
(3)
|
General corporate purposes
|
(4)
|
Maximum amount of borrowings under this agreement of US$10 million has been withdrawn.
|
(5)
|
Floating rate of a one-month LIBOR plus a spread of 1.75%
|
Common Equity Issuances and Dividends Paid
|
Quarter Ended March 31
|
|||||
($ millions, except as indicated)
|
2019
|
|
2018
|
|
Variance
|
|
Common shares issued
(1)
(# millions)
|
2.4
|
|
1.9
|
|
0.5
|
|
|
|
|
|
|||
Total common shares issued
|
108
|
|
77
|
|
31
|
|
Non-cash issuances
|
(76
|
)
|
(62
|
)
|
(14
|
)
|
Cash proceeds from common shares issued
|
32
|
|
15
|
|
17
|
|
|
|
|
|
|||
Dividends paid per common share
($)
|
0.450
|
|
0.425
|
|
0.025
|
|
|
|
|
|
|||
Total dividends paid
|
(193
|
)
|
(179
|
)
|
(14
|
)
|
Non-cash dividend reinvestment plan
|
75
|
|
63
|
|
12
|
|
Cash dividends paid
|
(118
|
)
|
(116
|
)
|
(2
|
)
|
(1)
|
Related to the Corporation's dividend reinvestment and share purchase plans
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
10
|
March 31, 2019
|
|
Consolidated Capital Structure
|
As at
|
|
|
March 31,
|
December 31,
|
(%)
|
2019
|
2018
|
Debt
(1)
|
56.9
|
57.0
|
Preference shares
|
3.8
|
3.8
|
Common shareholders' equity and minority interest
|
39.3
|
39.2
|
|
100.0
|
100.0
|
(1)
|
Includes long-term debt and finance leases, including current portion, and short-term borrowings, net of cash
|
Credit Ratings
|
|
|
|
|
|
As at March 31, 2019
|
Rating
|
|
Type
|
|
Outlook
|
S&P
|
A-
|
|
Corporate
|
|
Negative
|
|
BBB+
|
|
Unsecured debt
|
|
|
DBRS
|
BBB (high)
|
|
Corporate
|
|
Stable
|
|
BBB (high)
|
|
Unsecured debt
|
|
|
Moody's
|
Baa3
|
|
Issuer
|
|
Stable
|
|
Baa3
|
|
Unsecured debt
|
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
11
|
March 31, 2019
|
|
Consolidated Capital Expenditures
(1)
|
|
|
||||||||||||||||||
Quarter Ended March 31, 2019
|
||||||||||||||||||||
($ millions)
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Regulated
|
Total
|
|
|
||||||||||||||||
|
|
UNS
|
Central
|
FortisBC
|
Fortis
|
FortisBC
|
Other
|
Regulated
|
Non-
|
|
||||||||||
|
ITC
|
Energy
|
Hudson
|
Energy
|
Alberta
|
Electric
|
Electric
|
Utilities
|
Regulated
(2)
|
Total
|
||||||||||
Total
|
236
|
|
167
|
|
64
|
|
70
|
|
107
|
|
25
|
|
56
|
|
725
|
|
15
|
|
740
|
|
(1)
|
Excludes the non-cash equity component of the allowance for funds used during construction
|
(2)
|
Includes Energy Infrastructure and Corporate and Other segments
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
12
|
March 31, 2019
|
|
|
|
Common Equity
|
|
|
||||
|
Revenue
|
|
Earnings
|
|
Basic EPS
|
|
Diluted EPS
|
|
Quarter Ended
|
($ millions)
|
|
($ millions)
|
|
($)
|
|
($)
|
|
March 31, 2019
|
2,436
|
|
311
|
|
0.72
|
|
0.72
|
|
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
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
13
|
March 31, 2019
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
14
|
March 31, 2019
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
15
|
March 31, 2019
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
16
|
March 31, 2019
|