Fortis Inc. (FTS) Q3 2026 Earnings Call Transcript

Operator: Thank you for standing by. This is Betsy, the conference operator. Welcome to the Fortis, Inc. Third Quarter 26 Results and New 5 Year Capital Outlook Conference Call. As a reminder, all participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Stephanie A. Amaimo. Vice President, Investor Relations. Please go ahead, Ms. Amaimo.

Stephanie A. Amaimo: Thanks, Betsy, and good morning, everyone. Welcome to Fortis' third Quarter 26 Results and New 5 Year Capital Outlook Conference Call. I am joined by David Gerard Hutchens, President and CEO Jocelyn H. Perry, Executive VP and CFO other members of the senior management team, as well as CEOs from certain subsidiaries. Before we begin today's call, I want to remind everyone that the discussion will include forward looking information, which is subject to the cautionary language contained in the supporting slideshow. Actual results can differ materially from the forecast projections included in the forward looking information presented today. Non GAAP financial measures referenced in our prepared remarks are reconciled to the related U. S. GAAP financial measures in our third quarter 26 MD and A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to David.

David Gerard Hutchens: Thank you and good morning everyone. This past quarter has been 1 of the busiest and most positive I can remember during my tenure as CEO. Leading to meaningful progress and significant opportunities for our business going forward. We are also happy to put another strong quarter behind us. Operationally, we continue to provide safe and reliable service to our customers and invested $4.2 billion in our systems year to date. For the full year, we expect to invest approximately $6 billion, up $400 million from our plan. And we delivered earnings per share for the third quarter of $0.92 And today, we are unveiling our new 5 year capital plan, our largest to date. Big news hit in the quarter with respect to our Tilbury site in British Columbia, and ITC being awarded a competitive bid project in Iowa. And today, we announced that our Board of Directors declared fourth quarter dividend increase of 4% marking 53 years of dividend increases. Before getting into the details of our new 5 year outlook, I will turn the call over to Jocelyn to speak to our third quarter results.

Jocelyn H. Perry: Thank you, David, and good morning, everyone. For the quarter, reported earnings were $474 million or $0.92 per common share, and on a year to date basis, reported earnings were $1.4 billion or $2.69 per common share. As you can see on the slide, reported earnings in 2025 included income taxes and closing costs of $0.06 per share associated with the disposition of Fortis TCI. Excluding this impact, adjusted EPS for the quarter was up $0.05 and year to date adjusted EPS was up $0.06 On the next slide, you will see the adjusted EPS drivers for the quarter by segment. At ITC, EPS increased by $0.03 driven by rate base growth and lower stock based compensation expense, partially offset by higher finance costs. Our US electric and gas segment contributed a $0.02 increase mainly driven by UNS Energy. The growth in Arizona was due to higher electricity sales associated with residential and industrial usage, and customer growth. The timing of operating costs and lower income taxes associated with the amortization of investment tax credits on the battery storage project also contributed to the increase. Moderating this was the impact of milder weather quarter-over-quarter and regulatory lag associated with rate base growth not yet reflected in rates. At Central Hudson, earnings were largely consistent quarter over quarter as rate base growth the timing of costs, and a contribution to a customer benefit fund in 2025 were offset by a favorable regulatory adjustment made in the third quarter of 2025 upon implementation of the most recent rate order. Our Western Canadian utilities increased EPS by $0.02 in the quarter driven by rate base growth as well as lower income tax expense at Fortis Alberta. And for our other electric segment, EPS decreased by $0.01 largely due to the disposition of Fortis TCI in September 2025. The Corporate and Other segment reflects net unrealized losses on derivative contracts compared to unrealized gains in 2025. The timing of income tax recoveries and the disposition of FortisBC in the fourth quarter of 25. Foreign exchange had a $0.01 favorable impact for the quarter and higher weighted average shares issued under the dividend reinvestment plan and ATM program impacted EPS by $0.01 And as noted on the slide, the 2025 disposition of our assets in Turks and Caicos and Belize lowered EPS by $0.02 in the quarter net of finance cost savings. Year to date results were mainly driven by the same factors discussed for the quarter with a few additional items to note. For the 9 month period, Central Hudson was up $0.04 primarily due to rate base growth and the timing of costs, partially offset by the favorable regulatory adjustment in 2025 as discussed earlier. At UNS, EPS was down $0.01 which reflects lower margin on wholesale sales and higher operating costs in addition to the other items noted for the quarter. And lastly, the impact of foreign exchange was $0.03 and the impact of the 2025 dispositions net of finance cost savings was $0.05 year to date. Turning next to our regulatory update, In October, the ACC administrative law judge issued a recommended opinion and order in TEP's general rate application. Recommending an allowed ROE of 9.65% and a 55% common equity component of capital structure. We currently have an allowed ROE of 9.55% and a 54% equity component of capital structure. The order also recommended an annual formulaic rate adjustment mechanism with a range of plus or minus 50 basis points around the allowed ROE. The inclusion of post test year adjustments, the elimination of certain adjuster mechanisms, and the deferral of certain costs associated with Roadrunner Reserve II for future recovery. The ALJ's recommendation proposed implementation of new rates by December 1 and is subject to ACC approval, which is anticipated later this month. I will now turn the call back to David to cover key elements of our new 5 year capital plan.

David Gerard Hutchens: Thank you, Jocelyn. Our new 32.2 billion 5 year capital plan is $3.4 billion higher than our previous plan. Our 5 year rate base CAGR is 7.5%, up 50 basis points compared to the prior plan. We have also extended our annual dividend growth guidance of 4-6% through 2031. This new plan builds on the growth momentum across our high quality footprint while keeping customer affordability top of mind. The growth in our 5 year plan is largely driven by transmission and LNG investments. At ITC, the $1.7 billion increase was primarily driven by projects associated with MISO's Tranche 2.1 long range transmission plan, along with higher baseline reliability projects and new interconnections. At FortisBC, a $1 billion increase primarily reflects investments in LNG infrastructure including the Tilbury Phase 1B liquefaction expansion and the new Tilbury LNG storage tank. The remaining increase is driven by customer growth and reliability investments across our footprint. The new plan is highly executable with approximately 75% directed toward transmission and distribution investments critical infrastructure that supports stable and predictable returns. The capital program is low risk and comprised of 100% regulated projects and includes 11 major capital projects. Consolidated rate base is expected to increase from $45 billion in 2026 to approximately $56 billion in 2029 and $64 billion in 2031. Yielding 3 and 5 year compound average growth rates of 7.7% and 7.5%. Respectively. Last month, we were pleased to see MISO award ITC the Tranche 2.1 competitive bid project in Iowa, known as the Mark project. This allows ITC to design, build, own and operate the project which includes approximately 300 miles of new 345 and 765 kV transmission lines in ITC's service territory. The project's total investment is estimated at US$1 billion, with approximately $500 million included in our new 5 year capital plan with the balance expected post 2031. Now I will take a few minutes to speak in more detail on the capital plans in our 3 largest utilities. ITC's capital plan of $11.6 billion is the largest in the company's history and supports 5 year rate base growth of 8.6%. Up 50 basis points compared to the prior plan. ITC's regulated assets currently represent about 1 third of our consolidated rate base, with that portion expected to trend upwards over the plan as ITC continues to deliver our strongest rate base growth. Significant opportunities above and beyond the base plan exist at ITC, including approximately US$2.9 billion to $3.4 billion post 2031 for Tranche 2.1 projects assigned through rights of first refusal as well as approximately $500 million for the Mark project that I mentioned earlier. ITC may also realize future opportunities associated with the. with projects as part of the ongoing MISO and SPP transmission planning processes. Other potential areas of growth include customer connections associated with over 10 thousand MW of load growth for proposed data centers, industrial customers, and economic development projects in various stages of development across their footprint. This is up from 8 thousand MW last quarter. With significant investments underway, a robust pipeline of future growth opportunities, ITC is well positioned to deliver sustained long term growth through this transformative period of transmission expansion. Turning to UNS Energy. Their capital plan of $5.6 billion supports 5 year rate base growth of 7.4%. Like the prior plan, investments are spread across the value chain. Notably, over 2 thirds of the capital plan is concentrated in transmission and distribution infrastructure, with the balance consisting of generation and other investments. As for opportunities above and beyond the plan, we continue to see strong interest from both new and existing customers across our service territory. At TEP, we have 1 approved energy supply agreement associated with approximately 300 MW of data center load that is expected to begin ramping in 2027. And will be supported by existing and planned resources including renewable generation and energy storage already in service or under development. Beyond this initial agreement and the subsequent phases under negotiations with the customer, our Arizona service territories are experiencing strong demand associated with mining, industrial development, electrification, and broader commercial and residential growth. These opportunities have the potential to drive additional investments in generation, transmission and distribution infrastructure over time. Last week, both TEP and UNS filed their 2026 integrated resource plans with the Arizona Corporation Commission, outlining their plans to meet customers' projected energy needs over the next 15 years. TEP's base case scenario prioritizes affordability and assumes average annual sales growth of 5.7% through 2031. It also includes up to US$1.3 billion of opportunity above the capital plan through 2031 subject to RFP processes. Additionally, to evaluate the significant growth potential I previously mentioned, TEP included a high growth scenario in its integrated resource plan that would require approximately 800 MW of new generation and require up to $1.5 billion of incremental investments. These opportunities are not currently reflected in our base capital plan, but represent meaningful long term growth potential for the business. It is important to note that this high growth scenario is very beneficial to TEP's customers with the lowest rates of all scenarios as seen on the graph to the right. In terms of the next steps, the stakeholder process will begin next year, and we expect ACC acknowledgment in the third quarter of 27. Turning now to British Columbia, where investments in natural gas and LNG infrastructure are driving strong growth at FortisBC. FortisBC's $6 billion capital plan includes investments to maintain system reliability and integrity alongside major LNG and advanced metering infrastructure projects. The capital plan supports rate base growth of 7.9%, up from 6% in the prior plan. There are a number of projects underway at our Tilbury site. With additional opportunities for growth. Back in July, we received an order in council for a larger Phase 1B liquefaction project as well as a marine jetty to support LNG marine fueling in the Port of Vancouver. Total investments for this project are expected to be approximately $1.7 billion In September, FortisBC received environmental approvals for its Phase 2 expansion, including investing up to $1.1 billion in the Tilbury LNG storage tank expansion project, This 3 Bcf storage tank and associated regas improves resilience supports affordability for our customers. Phase 2 also provides an opportunity of up to 2.5 million tons per annum of additional liquefaction capacity to serve emerging domestic and export LNG markets. We have the flexibility to develop this project in stages, and we estimate an investment opportunity in the range of $2-4 billion depending on market demand and the majority of this expenditure is expected beyond 2031. We continue to work through permitting and our final investment decision. Development at the Tilbury site has been many years in the making, and represents the exceptional work by our team in British Columbia to expand the use of their gas network to produce regulated LNG that lowers carbon emissions and improves customer affordability. Bringing it all together, we are focused on executing our new 5 year plan, while working to advance our robust growth pipeline. I will now turn the call back to Jocelyn.

Jocelyn H. Perry: As we prepared our new 5 year outlook, customer affordability remained front and center. In addition to efficiently funding our capital plan, several of our key customer affordability initiatives include O&M savings targets, low growth projects like in Iowa and Arizona, least-cost capital projects like the Springerville repowering project, and the continued delivery of customer conservation programs. And with increased sales of LNG through the expansion of our Tilbury facility, we expect to continue to provide rate benefits for our customers. We continue to take a disciplined approach to funding the $3.4 billion increase in the new 5 year plan. Together with the $400 million increase in our 2026 capital plan. We advanced a portion of our funding requirements in 2026 through the issuance of US$1 billion of hybrids and approximately $260 million of ATM equity in the third quarter. Over the next 5 years, as you can see on the funding pie chart, our capital plan is expected to be funded primarily through cash from operations and debt issued at our regulated utilities. Our dividend reinvestment plan remains the foundation of our needs over the 5 year plan. We do expect to issue approximately $250 million of ATM equity over the next 12 months subject to market conditions. Overall, our funding plan is designed to support our strong investment grade credit ratings. Our credit profile is underpinned by a diverse high quality portfolio of regulated utilities with 95% of our assets in transmission and distribution across regulatory jurisdictions, providing stable and predictable cash flows. The plan supports average S&P FFO to debt metrics above 12% over the 5 year period with improving financial flexibility in the latter years. As well as average Fitch FFO leverage of approximately 5.9x. Taken together, our high quality regulated portfolio disciplined funding approach and improving credit metrics positions us to execute the capital plan while maintaining a strong credit profile. Today, we announced the declaration by our Board of Directors of a fourth quarter dividend of $0.665 representing a 4% increase. This brings us to 53 consecutive years of increases in dividends paid. A track record that we are very proud of. With our strong dividend history and regulated growth strategy, we are extending our 4-6% annual dividend growth guidance through 2031. I will now turn the call back to David to wrap up.

David Gerard Hutchens: When we think about the Fortis investment proposition, it really comes down to sustainable growth supported by our high quality portfolio of regulated utilities. We have strong rate base growth, a robust growth pipeline, and a transparent funding plan. We are investing to strengthen the resiliency of our systems and ensure they can reliably and affordably meet customers' evolving energy needs. We are doing that from a strong foundation. 100% regulated utilities, solid investment grade credit ratings, regulatory and geographic diversity, and a proven track record. All the right pieces to provide long term value to our customers and shareholders. That concludes my remarks. I will now turn the call back over to Stephanie.

Stephanie A. Amaimo: Thank you, David. This concludes the presentation. At this time, we would like to open the call to address questions from the investment community.

Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing any keys. The first question today comes from Maurice Choy with RBC. Please go ahead.

Maurice Choy: Thank you, and good morning, everyone. Recognizing that there is a lot of good growth in ITC as well as Fortis BC, I do want to touch on the large load opportunity at UNS Energy. In the past, you have highlighted a potential of incremental generation costing about $1.5-2 billion through 2030. And as I look at the presentation today on Slide 14, I see that there is up to $1.5 billion of investment. Assuming these numbers are apples to apples, is it fair to suggest that your new plan includes some but still not very much large load related CapEx. And maybe as a quick follow-up, if that is true, in the spirit of today's U. S. Elections, how do you see your outlook for this remaining growth CapEx being shaped? By the election if it does proceed as the poll suggests?

David Gerard Hutchens: Yeah. Thanks, Maurice, and thanks for the question. No. Actually, there is no additional, capital in our plan related to, any data center growth in Arizona. The difference is just the size that we were assuming. So when we talk about the estimated US$1.5 billion of additional investment opportunities. It was based on adding a certain amount of load to our, integrated resource plan. So we were trying to. We basically ran a model to try to get numbers based on probably something that was in the middle of that range that we were looking at before. So when we talked about, when we talk about the, the project, in Arizona, we have the existing, 300 megawatt ESA. We have additional opportunity for investment at that site, which we always put kind of around that 300 MW to build that total site out to, say, 500 or 600 MW. And then we were always talking about a second site as well. That is still, looking at building out as. That there. And north part of the Tucson area. And that 1, we estimated at 500 to 700 MW. When we put in that $1.5-2 billion, it was more like that whole bucket of projects. And here we are actually just taking a little bit smaller portion of it for that high growth scenario. And then so to opine on the election outcome and whether or not then what that might mean for data center development. I think as we sit here today and as folks go to the poll and polls in The US, obviously, the data center topic has been very front of mind for a lot of voters and a lot of politicians. What I am hoping is that we can hopefully find our way away from you know, rhetoric and look at the real positive benefits that we see from data centers. I. You know, As long as they are done right, as long as no cost shifting, as long as there is net benefit to our customers and all the environmental and water and the rest of those things are addressed by the communities that they are going in. But when you have these large loads come in, that makes your system more efficient and saves customers money. We are seeing that in Iowa's as you saw on the slide, talking about that 20% reduction in those in those rates there. We see it in Arizona even though we are not making any additional investments for the first 300 MW, of data center that we have there. We are seeing a $13 per month benefit. So all of those things, hopefully, will flow through and people will see the proof and the positive nature of what this of what some of these large loads can do. And it is not large data centers, it is large load and high capacity factor customers like we are seeing for LNG and British Columbia. So there are some positive benefits, but I think no 1 wants to talk about them until tomorrow.

Maurice Choy: Understood. That may all that all make sense. And maybe I could just finish it off with a question on funding. Particularly given the greater growth that you have in front of you. I know that the DRIP program is still the main tool that you use for your common requirements. And in the past, you said that, you know, all options are on the table of CapEx rises, including asset sales and considering your options there. How should we think about your use of ATM moving forward? You have initiated that as part of your Q3 period. Using that vehicle versus discrete issuances And perhaps more broadly, I see the 12.3% FFO debt average, but how do you philosophically size what is the right buffer versus your 12% threshold?

Jocelyn H. Perry: Yeah. Thanks, Maurice. Yeah. So we do have the ATM program available, and the DRIP, as you said, has been quite healthy and provided most of the equity needs that we have. Look. We anchor everything back to, I think, the credit metrics that you referred to, and what is the right buffer. It takes a lot to move, the metrics given the size of Fortis, but know, we have said that we would like to have, you know, a 50 to 75 basis point buffer above those, those metric thresholds. And really, it is not any 1 thing that I think would happen with Fortis that would that would you know, kick us past those buffer limits is more about if things change in the world and the thresholds just change at the rating agency level and not anything to do before this. But we do anchor sort of our funding plan around holding that kind of level of buffer. So when I think about the ATM going forward, as we listen to David talk about all those, I guess, above and beyond the plan opportunities in each of our regulated utilities, you know, to what you said, Maurice, we will be looking at everything. ATM will be 1 piece of that to fund that. But, again, Anchor Back to our credit profile and our credit metrics. We also have room for hybrid, more hybrids in our cap structure. We only have about 6% in our cap structure today. And as you know, I mean, there is room to add more there. And so, again, no real secret to how we think about funding. We try to maintain the buffer. But when we start to see and get visibility on the growth above and beyond the current plan that we will have, we will assess what, you know, what options are in front of us, and, we will choose it once we can see the new growth profile. For the new capital plan. that is great.

Operator: Flex, The next question comes from Robert Hope with Scotiabank. Please go ahead.

Robert Hope: Good morning, everyone. I appreciate all the details on the updated capital plan. Maybe taking a look at Slide 17 and Tilbury LNG and kind of the spending breakdown there, as the federal government and provincial government are much more amenable to, we will call it, conventional energy investment and there is a concerted effort to accelerate projects. As you take a look at these projects, is there an opportunity to do more of that site? Or could we see some of the time lines being moved forward there?

David Gerard Hutchens: Yeah. I will turn that over to Roger to talk about the timeline because I know he is got, you know, that they are really hustling to get these projects done as quick as they can, which is what is shown in these, in this table on page 17. But I also wanna make sure that, you know, that it is really loud and clear that, second phase, Phase 2 expansion, that can add up to 2.5 m. MTPA to. Of liquefaction there, that is a-- that is a huge project and has a ton of opportunity. We know we have to figure out the FID and a whole bunch of other stuff and permitting and, you know, and all the things that we have to do on consultations, etcetera. That 1, we are hoping we could see squeeze in the beginning of the next 5 year plan. But, Roger, can you can you opine on some of those details?

Roger Dall’Antonia: Yes. Thanks, David. Good morning, Robert. Thanks for the questions. Yes, as David noted, Tilbury has 3 distinct projects to it. Tilbury 1B, which is the order and counsel we received in the summer which is really focused on marine fueling market as that grows. The second point is the storage tank that 3 billion cubic foot storage tank that is really gas storage on-site for system resiliency. And reliability and managing gas supply costs. And then Tilbury 2 is liquefaction, and that could serve 1 of 2 markets It could serve the expanded Buncream market for marine fueling or could be export of LNG. That is the full build out. I think, Robert, you are asking whether we could do more on that site With this environmental assessment certificate that we just received, that covers the potential on that site As far as timelines go, Tilbury 1B and TLST are in this plan, and we are into the design phase and contracting and we expect to commence construction at some point 2027 and in service end of 2030 into 2032, but we will have more details on that as we get the development and planning. Tilbury 2 is the bigger opportunity It could be done in phases, as David said, or we could end up seeing a large offtake but we also have to deal with upstream investments for gas supply. So there is a bit more work to realize that opportunity. But given the growth of the bunkering market, part of it could be done earlier within the next number of years to serve that market while we look to broader opportunities beyond BC with export LNG.

Robert Hope: Alright. that is great. And then maybe moving over to a bit more of a broader question. there is been some large and notable M and A transactions in the utility space. David, can you maybe update us on how you are thinking about the potential for M and A in this environment or still the focus on organic growth?

David Gerard Hutchens: Yes. I would say still our primary focus is obviously on organic growth. And we are doing a lot of that as you can see, our 5 year capital plan has increased every year, I think going from 6% to 6.5% to 7% to 7.5% So really seeing that additional organic growth come to fruition. I think we and our investors would agree if we have a dollar to spend, the best place to spend it is an additional organic growth because it is a dollar invested in rate base and you get $1 in rate base. So it is it is, it is the most efficient way for us to add value. it is also a great way for us to, you know, add value to our customers, especially investing in the infrastructure that they need for energy or an infrastructure that provides more efficient and lower and more affordable power for them. So that. that is that is the that is the main focus still. You know, we do see a lot of the M and A activity that is happening in the sector. And there is always the view that there may be some potential opportunities there, whether it is through a balance of synergies, bigger balance sheet, better credit, all of those things. We continuously look at all that stuff. But it is not a focus of ours because it is not something we need to do. it is something that we continuously evaluate though. Appreciate that. Thank you. Yep.

Operator: The next question comes from John Mould with TD Securities. Please go ahead. John, your line is open. You may ask your question.

John Mould: Yes. Thank you very much. Sorry about that. Good morning, everybody. Maybe just starting with the Tucson Electric rate case, and I appreciate you do not want to get ahead of the commission and its debates and a potential final order. Just wondering if you could talk about from your perspective, the puts and takes in the ALJ recommendation and how you are thinking about potential regulatory lag just in the context of the recommended post test year plan and first adjustment in April 2028, excuse me, as, you know, currently proposed.

David Gerard Hutchens: Yeah. So, first off, yeah, we are still in the middle of the rate case process. And the recommended opinion and order is just kind of 1 piece along the way. And we are really anxious and excited to get to the, the open meeting and get the rate case behind us and hopefully get rates effective the December 1, which is the plan currently. So yes, it is going through the normal process. We filed exceptions last week on a couple issues that are still you know, in debate, like ROE, etcetera. So it is just in that normal process. I would not apply any more than that. And then on the regulatory lag perspective, we did get the recommend. Recommendation for an adjustment mechanism, and it is basically looks a lot like UNS gas's and other ones that have been recommended in the state. And it will not go into effect the first actual adjuster will be in April 2028. So there will be a little bit of regulatory lag that we will see between, you know, the time period of these rates going into a effect, and that April time frame, which will reflect the costs and investments made up until the end of 27. So still a little bit of regulatory lag there. But, you know, this is this is 1 of those things where it is it may not be absolutely perfect. it is not a forward looking you know, test-year kind of mechanism, but it is a really great result from the perspective of leveling out and smoothing out the earnings down in Arizona. Okay.

John Mould: Thanks for that. And then just maybe going to ITC and the 10 GW of potential low growth customer connections there, mainly data centers and economic development. You know, I appreciate this is out in and a beyond the plan as it stands. I am just wondering if you can give us a sense of how that potential low growth is paced, like what the timing you know, might look like and how we should think about you know, the potential investment on your end you know, that could come from that bucket of projects if. Maybe it is aspirational to say that you know, if they all were to come to fruition, but just how are you thinking about the potential you know, incremental investment opportunity that could come from that if you do see a high conversion rate.

David Gerard Hutchens: Yeah. I will I will turn that over, to Chris so she can kind of explain the different pieces we have there for interconnections and then additional transmission investments that might come through some of the other planning processes.

Analyst: Yes. Thanks, David, and good morning, John. Thanks for the question. Yes, I think you should look at that as incremental. So we already have quite a bit in the plan. So we have 800 million in the plan for data centers. And that is for data centers that have been publicly announced and have approval. So everything in that 10 GW bucket are things in our pipeline. And they are anywhere from you know, further down the pipeline and having negotiations on agreements, to early stages of doing the planning work. So I think you can expect that not all of that will come to fruition, but it is it is real enough that, you know, that we felt good about projecting that. And, you know, it is. As David always says, we never put anything in the plan until it is until it is real. Okay.

John Mould: I will I will get back in the queue if thanks very much for taking my questions.

David Gerard Hutchens: Thanks.

Operator: The next question comes from Benjamin Pham with BMO. Please go ahead.

Ben Pham: Hi, thanks. Good morning. I want to start out with the hard CapEx plan. I know you have mentioned that it is highly executable for a number of different reasons. Can you unpack that maybe a bit more for us and comment maybe specifically on your thoughts on the labor availability material availability and maybe just more broadly, what do you think is the most difficult part of executing to our plan?

David Gerard Hutchens: Yes. Thanks, Benjamin. I think this is kind of standard, you know, questions that we look at anytime we take on big projects. You know, making sure that we have the resources, making sure that we can get in the queue for the supply chain, which will drive the time line of the projects. You know, all of those things are part of how we have been doing projects. Forever. And it. it is no different. it is just that these are. We have a lot more. And a lot larger projects. So it obviously is a little bit more requires a little more attention and focus on those large projects. But this is not something that we are changing overnight drastically. I mentioned before that we have been slowly increasing our rate base growth. So this is not us go. You know, going from 3% to 7.5% and wondering how we are going to get all that executed. This is all well within the capabilities of our companies and things that we have been planning for a long time, and we will focus on that. So, that is why we think that they are highly executable because it is stuff that we do and have been doing, for, you know, decades and decades. So other than supply chain, labor, and it is kind of the same concerns that you will see across any sector really these days. We think that we will be able to sort that out. Okay, got it.

Ben Pham: Maybe my second question is on the federal mega-deduction? Is that reflected in your plan at all? And then and if any, is there implications on credit metrics or rate based implications for the Canadian utilities?

Jocelyn H. Perry: Yes. So we have not reflected. As you know, that is not into legislation just yet. And so the final details of that is to be determined. Based on what we see, though, thus far, we do not expect it to have a material impact on our credit metrics. And if you think about it, what this deduction does, it allows you to sort of write off things a little faster for tax purposes so it reduces your taxable income and the amount of taxes you have to pay, but that would also reduce particularly on our western utilities, the amount that we are collecting from customers. So net, we are not expecting it to have a material impact on credit. And, so. But we will we will stay tuned for the final rules around the PMD. And, once we have it in hand, we will, we will come back with more certainty around the impact.

Ben Pham: Okay. that is very helpful. Thank you.

Operator: The next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead.

Mark Jarvi: Yes. Good morning, everyone. Charles, I am just going back to your comments on funding. Curious in terms of where you could push the hybrid issuances? And then just, like, what would be a reasonable assumption in terms of ATM usage over the next 2 years to execute on the plan ahead of you?

Jocelyn H. Perry: Mark, with respect to where we could push the hybrid capital, like I said, we have about 6% in our cap structure today. I mean, if you look at DBRS's limit, I think, is 10% and S&P is 15%. If we were to push it to 10%, you know, we definitely have over 2.5 billion that we could do in hybrid capital. For any growth above and beyond the plan. With respect to usage of the ATM, we have laid out what we need for the current plan that we have. We have no plans of using the ATM program. All but for additional capital being added to the plan that you are looking at. ATM will be 1 thing that we will look at in addition to hybrids and everything else. In our toolkit. So no plans to use the ATM above what we stated here today. And but as we, you know, firm up, above and beyond the capital plan investments, if some of those were to come to fruition, then you know, ATM would be 1 consideration that we would use.

Mark Jarvi: Would you see anything kind of potentially come into the plan in the next couple of years that would require the ATM, or does it feel like it is more later in the 5 year plan that things could change?

Jocelyn H. Perry: So I mean, we cannot build these things overnight, and these are large projects. And David just basically said that, you know, these things are evolutionary over time, and we have been slowly increasing our rate base growth I would tend to think that we would see more in the latter years of the plan as opposed to the front end of the plan. Yeah, that makes sense.

Mark Jarvi: And then, David, just coming back to your commentary on planning and ramping into the growth, how do we think about the IRP base case in Arizona, potentially a large load? Do you just go larger on existing sites where you plan the combined cycle units in 2031? Do you have additional sites you have there? Like, how far in advance are you in terms of a accelerated sort of IRP planning process right now?

David Gerard Hutchens: Yeah. We have, we have many sites and options that we have been looking at and evaluating for that. So it is quite a number of them. And there is--you know, there are sites for generation development. there is transmission needs. there is a lot of different things that fall out of the integrated resource plan if we see especially that high growth scenario. So we do have some, options laid out and are evaluating those.

Mark Jarvi: I am just curious in terms of the conversation about the expanded 300 MW going another 300 MW the second site. How are the customers thinking about timelines? You know, we are we are seeing some questions about slippage on timelines. Are your customers feel like there is an opportunity to go faster if you have an accommodating utility setup here and communities to support this project.

David Gerard Hutchens: Yeah. that is a that is a great question. Susan, if you can opine on that.

Susan Gray: Sure. Good morning. Thanks for the question, Mark. Yes. So, we are working really closely with our customers to understand their needs. And to go as fast as they need us to go. that is why, as David mentioned, we got a lot of options that we are evaluating to make sure that we can meet the timelines that come up. We have not had anything put in front of us yet that we cannot meet. Of course, with project blue, this first phase, we already have the generation available. And so as we plan out the next sites, we would we would work really closely with the customer to make sure that we are bringing the new capability onto online to meet their needs.

Mark Jarvi: Is there any indication, Susan, that their timelines have changed, either accelerated or delayed?

Susan Gray: We have not seen necessarily a shift. 1 way or the other. We are still negotiating you know, further expansion of Project Blue. Always got Copper World just announced. That they are, planning to be online, later in our 5 year plan and we have got South32 still moving forward on their original timeline. So have not seen anything shift 1 way or the other.

Mark Jarvi: Sounds great. Thanks for the time to everyone. Mhmm.

Operator: The next question comes from Michael Lonegan with Barclays. Please go ahead.

Michael Lonegan: Hi, thanks for taking my questions. So you raised your dividend 4% after also raising it 4% last year. You continue to guide a 4-6% growth now extended through 2031. Obviously, subject to board approval, but just what is your thinking? Could we expect the low end of this 4% continue over the plan? Or you expect an increase in the rate of dividend growth? Anything you could say there, like do you have a targeted payout ratio over time? Anything you just chat. Say there would be helpful.

David Gerard Hutchens: Yeah. We have not got to the point where we are putting out a targeted payout ratio. And what we have always said, for the last several years is yeah, we are targeting that 4% to 6%. We also wanna make sure that we are, you know, pulling our pay ratio down and which we have, pretty well over the last 3 or 4 years. So we would like to, you know, keep nudging that a bit lower, but we do not really have anything other than the 4% to 6% guidance, to on the dividend going forward.

Michael Lonegan: Thank you. And then, in Alberta, the third TBR term appeal was dismissed. I know the argument there was that the commission improperly based the capital funding Just wondering how are you feeling about the prospects in Alberta going forward in terms of going forward in terms of the regulatory environment and do you have concerns over about less than favorable outcomes in the future?

David Gerard Hutchens: Yeah. This is the beauty of our business model is we have people in each of our jurisdiction to opine on exactly what is going on in their neck of the woods. So I am gonna turn that to Janine.

Analyst: Good morning, and thank you for the question. Yeah, the outcome on the PVR appeal decision was not entirely surprising. We felt it necessary to bring it forward to the court to have the discussion about how the plan was designed. But we had been prepared that this may be the way the court may align with the outcome of the previous decision of the AUC. With respect to our relationship with the AUC, we have a very, very constructive relationship with the regulator. We are operating very effectively under the current PVR plan and we have been in contact with them about how a rebasing opportunity might look and what the prospects for future rate making might look like, whether that is a continuation of PBR or a return to cost of service or what other regulatory approaches might be undertaking. So we are constructively and proactively having those conversations with them and our relationship allows us to do that. there is a lot happening in Alberta. Certainly a lot of opportunities for economic growth. Fortis Alberta operates in 8 of Alberta's 10 fastest-growing communities, so we are seeing a lot in terms of, new load interconnections, large loads, commercial, industrial, and some data center. So on all fronts, I would say feeling very, very positive about the opportunities to continue to invest in a fair large system that we have here and even to continue to invest in reliability and wildfire new technologies to make sure that we are leveraging the grid for affordability. Lots of prospects, lots of appetite to see us continue to do those things The positive relationship with the regulator positions us well-to-do that. And we are more and more seen as a trusted advisor with the government of Alberta as they want to see these things happen in the province as well. So certainly partnering with them and the ISO to make sure that all of these things can occur.

Michael Lonegan: Great. Thanks for taking my questions.

Operator: The next question comes from Elias Jossen with JPMorgan. Please go ahead.

Analyst: Hey, good morning. Thanks for the update. Just wanted to circle back on the TEP rate case. So to the extent that the ALJ's recommendation is tracking pretty closely to your original request, I know you had discussed in the past about how. About potentially revisiting its EPS guidance. Is that still something that you would take a look at, or how are you thinking about that in relation to this rate case outcome?

David Gerard Hutchens: Yeah. We still are considering that. 1 of the things that. Well, 1 of the prior questions was around regulatory lag associated with the next 1.5 years until the first adjuster goes into place at TEP. So we will have to we will have to manage basically that timing, but it is something that we definitely consider. Okay. Got it. Thank you. And I will keep my questions there. Thank you. Okay. Thanks.

Operator: This concludes the question and answer session. I would like to turn the call back over to Ms. Amaimo for any closing remarks.

Stephanie A. Amaimo: Thank you, Betsy. We have nothing further at this time. Thank you, everyone, for participating in our third quarter 26 results and new 5 year capital outlook conference call. Please contact investor relations should you need anything further.

Operator: Thank you, and have a great day. This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, have a pleasant day.